The phenomenon of global demand for shares

The stock exchange information from the past hours sounds something like this: stock prices in the US have reached record levels, in Europe the indices are at their historic highs, while stocks in Poland, Romania, India and Switzerland are breaking all-time records ... culturally and economically, the markets were linked by a huge demand for stocks.

- It seems that the main reason for this is the resetting of the entire world economy after the outbreak of the pandemic and very similar actions by politicians and central banks in each country. Hence, the similar behavior of the stock markets in an environment dominated by the common desire and striving for a quick recovery of the economy - explains Daniel Kostecki, the main analyst of Conotoxia Ltd., a company providing Forex services for users of the Cinkciarz.pl portal. 

Capital is looking for stock exchange profit

In addition to the recovery climate, there are also the issues of inflation and negative realities interest rateswhich results from the difference between the possible minimum interest rate on bank deposits and, as a rule, a much higher increase in prices. In practice, almost everywhere in the world, consumers have to pay banks for keeping cash, the purchasing value of which is rapidly declining.

- In the US, real interest rates are minus 5,3 percent, in Poland minus 4,9 percent, in Norway minus 3 percent, in the euro area minus 2,7 percent, and in Great Britain minus 2,4 percent. This, in turn, can push capital towards riskier assets as investors recognize that there is no risk-free way today to receive remuneration from the capital held. - says Daniel Kostecki from Conotoxia Ltd.

That's not the bubble level yet

The outflow of money from accounts and deposits can now benefit the stock market, helping stocks rise. Another important element: governments today seem to be pro-cyclical fiscal policy, central banks loose monetary policy. Even a slight tightening of it, by reducing the asset purchase program or the first interest rate increases, may not yet return the current trend.

- Looking at the stock price indices, it still seems that we are not dealing with a bubble in this market. The C / E forward ratio for the S&P 500 is 22, which means 22 years to wait for the full return on capital invested. On the other hand, the yield on 10-year US bonds is around 1,33%, which means that the same return should be waited for 75 years. Thus, it is easy to find an answer to the question of when the current bull market may end. When the valuation indicators soar, for example, towards 40 or 50 times the profit (i.e. a bubble appears) or when the yields rise to the level of 3 percent or more - is determined by the analyst Conotoxia Ltd.