With earnings season in full swing, the markets maintained their bullish stance last week. The US...
Weekly Market Update - Euphoria returns...
I am referring to the euphoria pushing the US stock markets up the 5th week in a row.
Last week, the S&P 500, DOW, and the Nasdaq reached new highs, and the tech-heavy Nasdaq index outperformed its peers to gain 3.00%.
While the Russell 2000 small-cap index is still lagging behind the major indices year to date, it recorded a stellar 6.00% gain last week.
If you are wondering what is fuelling this Euphoria; there are quite a few factors like;
- 81% of the S&P 500 companies beat the earnings estimates, which is higher than the five-year average of 76%
- Resurgent labor market adding 531,000 jobs in October, also exceeding economists estimates
- While the tapering has begun, the stimulus measures are still on.
- The FED is still Dovish on the increase of interest rates, aiding the supply of cheap credit.
- Pfizer announcing strong efficacy results of its oral antiviral COVID-19 pill.
- Pent-up savings coupled with FOMO(Fear of Missing Out
With the markets reaching new highs every week, it is also a cause for worry as such euphoria typically creates a bubble that can burst any time.
Some factors also indicate that this Euphoria is irrational and highly speculative, like;
- 53% increase in Tesla Share prices in a month over a deal with Hertz that has not even been signed yet!
- Squid Game cryptocurrency developers Rug Pull
- Potential Stagflation
So, Are we in a Bubble?
Yes and No!
Technically speaking, the markets have been in the overbought territory for a while now. With the Fed & the US administration continue to support the equity markets, it isn’t easy to predict how long this current bull run will continue.
With ample liquidity, if the earnings continue to improve, the markets are likely to grow further.
EuropeLow-interest rates outlook from the ECB & strong corporate earnings continued to push the markets up in Europe. The Euro Stoxx Index rose 1.67% last week. Individual country indices were also up across Europe, & the UK’s FTSE 100 index gained 1.25%
ChinaUnlike the west Chinese markets continued to slide down, the CSI 300 index slipped 1.4%, & the Shanghai index lost 1.6%.
Chinese investors are wrestling with an intense real estate debt default crisis, another Covid outbreak, & weak economic data.
IndiaIn a short festive week in India, the Sensex and the Nifty recorded modest gains. The BSE Sensex closed the week at 60,067.62 & the Nifty at 17916.80
The outlook for the year is still positive as Nov & Dec are typically favorable for investors.
If you are a long-term investor, it is still a good time to stay invested or start an investment.
Just like how you trim your nails when overgrown, it is also essential to book profits & reduce the risk level of your portfolio in line with your risk appetite.
Diversification into bonds & cash can also be a good idea.
Stay Safe, Stay Invested.
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