By Gaia Freydefont
Bullish listed markets are now sliding into market correction territory, which may provide more opportunities for investors into longer-term, unlisted companies, less directly impacted by this correction.
Many investors are seeing the current market conditions as an opportunity to take profit from their investments in listed markets and re-invest into longer-term unlisted companies, while at the same time taking advantage of the Government’s generous EIS benefits.
The fall in value of the Nasdaq Composite index over the past few weeks reflects a dip in value of the overall market and constitutes a market “correction”.
Since its peak in November of 2021, the market has fallen by over 10%, constituting the definition of a correction, which aims to correct artificially inflated stock prices and unsustainable growth.
This has been led, in part, by stocks sensitive to lingering lockdowns and periods of restrictions, making it hard for investors to know what to expect as the Omicron variant surges and paves the way for whatever variants evolve next.
The unpredictability of the spread and virulence of new COVID-19 strains means that a return to ‘normal’ is still potentially far and with efforts to tackle the pandemic, supply chain issues and workflow disruptions won’t be out of the ordinary going forward.
The market likes certainty and investors rely on predictions, and the overhang of the coronavirus pandemic has made certain that those are impossible to count on.
This general period of sell-off of riskier assets is also evidence of the changing position of major central banks, and most notably the Federal Reserve, as they have indicated that the central bank would start to pull back its emergency pandemic support earlier than anticipated.
This correction is having a clear impact on not only ordinary stocks, but also the cryptocurrency environment and this is made explicit by Bitcoin, which has fallen to its lowest level in the past five months.
However, this correction may prove to be some good news for long-term unlisted companies. In short, startups.
Some may approach the recent drop as an opportunity to invest into unlisted companies who will be less directly impacted by this listed market correction.
This market correction in the face of major unpredictability, may steer investors to turn to longer-term assets, marking an exciting potential shift to a focus on start-ups.
While the correction may be a sign of a relatively turbulent year to come for the listed market, this may mark a good opportunity to put funds into unlisted companies and take advantage of EIS/SEIS benefits; constituting an exciting period for investors into start-ups and early-stage business in the short term.