Markets in Euphoria. What Will the Week Bring?
The US labor market data released on Friday – although mixed – confirmed the stable condition of the US economy. Recent geopolitical events have not significantly affected the markets, which continue to grow dynamically.
Have the markets entered a phase of euphoria?
While the risk premium in relation to the expected profit growth remains positive, the value calculated in relation to the current rate of growth of profits of the companies included in the group the S&P 500 index is already close to negative levels. Can this be considered a warning signal for bulls? Not necessarily. This indicator has been falling for more than two years and has not yet hindered the bull market on Wall Street.
The ratio of the valuation of the US stock exchange to the rest of the world can also be seen as an alarm signal, which has already reached the level of 3 standard deviations from the average, which indicates extremely tight valuations of the market in the US. Nevertheless, the ongoing bull market is defended by the solid foundations of the US economy and the growing importance of American companies, while at the same time there is a lack of competition from Europe or China. So are we in for another wave of growth on Wall Street?
Excessive optimism should be tempered by the fact that there is already a very large dose of optimism in current valuations. Additionally, the number of bears in the latest AAII survey turned out to be historically high, although the effectiveness of such indicators in determining chart tops is mixed. Will the current upward trend of the main stock indices be able to continue into the next year?
We invite you to a webinar with the Chief Economist XTB Dr. Przemysław Kwiecień, in which he will discuss issues such as:
- How long will the increases last?
- Where do such increases come from? DAX?
- What do the latest macroeconomic data tell us?
About the host
Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.
CFDs are complex instruments and involve a high risk of a quick loss of cash due to leverage. 69% of retail investor accounts record monetary losses as a result of trading CFDs with this CFD provider. Consider whether you understand how CFDs work and whether you can afford the high risk of losing your money.