Investing in indices is a great way to put your money to use without spending too much time on analyzing the market. There are different types of indices that you can keep an eye or add to your portfolio. They can include stock indices, currency indices, indices that focus on specific industries, and more.
What is a stock index?
A stock index is a mathematical average of a selection of stocks intended to give a broad indication of the market or sector performance. When you invest in an index, it means you are investing in the underlying stocks, or at least their movement when you invest in index CFDs.
In addition to the low effort required, investing in indices is a good way to diversify your exposure and lower the cost of investment. Let’s take a look at some indices that have managed to perform well, or relatively well, in the current dire economic and financial conditions.
Performance of key indices during 2022 thus far
- The US Dollar index. While this is not a stock index, it has performed remarkably well this year due to the Fed’s hawkish monetary policy. The index measures the performance of the US Dollar against a basket of other currencies. Investors flocked to the safety of the US Dollar as equity markets and even bond markets took a plunge. The index started the year at around 96 points and now it is trading at around 111 points.
- The Nikkei 225 moves sideways. The Japanese benchmark which includes 225 Japanese companies has not grown during 2022. It moved sideways and is currently trading at around 27,000 points. Even though it is still below the 29,000 level – around which it started the year – its performance is not bad compared with other benchmarks like the FAANG, and the Standard & Poor’s 500. The Japanese economy can still grow and return to its earlier higher levels, especially considering the importance of its currency. You can trade this index and many other indices through indices CFDs with a renowned broker like Easymarkets, which allows you to build a portfolio of instruments from different asset classes.
- The NASDAQ seems to be recovering from its lows. The technology index seems to be in correction in 2022. In recent weeks, it has shown signs of recovery. The overall pattern seems like an ABC technical pattern, waiting for the upside C wave to start.
Market Outlook
The performance of equity markets this year has been quite unimpressive. Nearly all equity benchmarks have dropped, including those of emerging markets. This is mainly due to high inflation and rising interest rates. Economies around the world are overheating, and businesses and households are struggling with rising costs. At this point, a recession seems to be likely in Europe and other economies. Yet, things can turn around quickly.
Should unemployment rates go up, this will probably prompt the Federal Reserve to slow down its pace of rate hikes, although it would mean more people losing their jobs. Transition towards greener economies can also make the world less vulnerable to oil and gas price shocks. Generally, the outlook remains pessimistic, but things can change fast.
