Stock exchanges are booming. It happens when things go wrong.

Just open the first better newspaper or go to the news portal to read about the mass of negative information flowing from global economies. Riots in the United States, disagreement and growing conflict between the US and China, recession in Australia (and not only), and tensions that have not completely died out due to the coronavirus epidemic, are things that we can even sing in a number of negatives. Every week there are more and more of them. Meanwhile, broadly understood stock exchanges behave very positively. Looking at the last days, and we can even talk about a good month, everything seems to be back to normal. Nay, NASDAQ100 is coming to set new heights of all time, and the other main indexes are trying to chase him clearly.

In search of positives

Looking globally at macroeconomic data, it is still difficult to talk about a significant improvement. Publications are still bad but outperform. Of course, all assumptions about future readings are purely psychological, but there is no doubt that it builds somewhat good mood. US employment figures are a good example. Market consensus assumed that the next reading would show another 9 million people without a job. The publication revealed a much smaller number, reaching about 2,7 million. Of course, this trend can be counted against the positives. Looking from a more long-term perspective, the data remains bad. There were more unemployed in the United States, which has consequences in the form of significantly lower consumption and lower economic growth, apart from correcting this claim with other macro data, such as PMI or new orders in industry.

Prepared for recovery

The behavior of investors may seem like an anomaly in the context of what is happening in the world. Are they preparing for recovery? I think that many people (not just investors) expect a faster return to reality. Hope for improvement and the pace at which we will notice it flooded the market with demand. This trend is very well visible after index valuations. Stock exchanges take their breaths up with almost no breath.

DE30 chart (CFD on. DAX 30), interval H4. Source: xNUMX XTB xStation

German graph DAX index fantastically shows this tendency. Practically every day we are dealing with specific growth movements, although we know perfectly well that from the end of 2018 we are dealing with a slowdown in Germany. We only need 10% to return to the historical peaks.

Capital flows to the stock exchanges

Definitely more cash appeared on markets that attract with their volatility and greater risk appetite for investors. We see it primarily after the outflow of capital from the so-called safe haven. Growths on both the dollar and gold slowed down. The US currency has at least the second week in a row in which it is strongly depreciating, in particular against major currencies. This weakness is also reflected in quotations with exotic currencies. A bit of appreciation was also used by the zloty, and its support with lowered interest rates will certainly remain for some time. The situation with gold looked slightly better than USD. It was only overrated this week, where good moods were reflected in the equity markets.

Gold chart, H1 interval. Source: xNUMX XTB xStation

A big discount, which we see at the hourly interval, may be a response to the psychological barrier around $ 1743,76, which this metal tries to overcome at least the third time. Currently, the price smoothly beat further support. The lack of major adjustments along the way may indicate dynamic capital outflows from funds ETF for goldwho until recently bought them in larger quantities. This capital could have contributed to fueling equity markets.

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Bad data and negative news are not, as you can see, a major obstacle to recording strong increases. Global economies are living with the specter of rapid regeneration and as they recover from the crisis the epidemic has brought them. Investors certainly share this tendency, building optimistic sentiment. Finally, the key question arises: how long and how long will it last?