February 20th – The world’s major stock markets have generally risen this year. Market analysts believe that the main reasons for the recent stock market rise include signs of easing the COVID-19 pandemic in some countries, the smooth progress of vaccination in many countries, and the introduction of loose monetary policies by central banks.
However, the global economy has not yet emerged from the haze of the pandemic, and there are still hidden worries under the rise of the stock market.
In terms of the U.S. stock market, the Dow Jones Industrial Average, the Standard & Poor’s 500 Index and the Nasdaq Composite Index have risen 2.9%, 4.2% and 7.58% respectively since the beginning of 2021.
Analysts pointed out that the main factors driving the recent rise in U.S. stocks are the Biden administration’s plan to launch a $1.9 trillion economic rescue plan, the promotion of vaccination in the United States, the increasing number of coronavirus cases in the United States and the performance of listed companies in the fourth quarter of 2020 exceeded expectations.
Prajyaqta Bede, strategist at the market research firm MRB Partnership, believes the impact of the Biden administration’s fiscal stimulus on economic growth will be reflected between 2021 and 2022.
The current risk asset price already reflects the prospect of high growth, mild inflation and low interest rates that fiscal and monetary policies may bring in the future, and the subsequent market performance is likely to be disappointing.
Barry Bannister, executive director of the U.S. Equity Research Department of the American investment bank Stiefer Financial, told reporters that the year-on-year growth of the global broad money supply usually peaked at nearly 20%, and has now reached this level.
Data since 2008 shows that the S&P 500 index has increased by 3% annually after the peak of the global broad money supply, so “we expect the market to stop rising”.
In terms of European stock markets, the average price index of 100 stocks in the Financial Times in London has risen since February, including significant gains in aviation, hotel and energy stocks.
The DAX index in Frankfurt, Germany, has also hit a record high recently.
David Madden, an analyst at CMC Markets, believes that the British stock market is due to the following reasons: first, the growth rate of confirmed coronavirus cases in the United Kingdom has slowed down significantly; second, the UK’s economic growth rate in the fourth quarter of 2020 is better than expected; third, the Bank of England expects that the UK’s economy will be stronger after the lifting of the blockade again as vaccination progresses steadily. Rebound vigorously.
Zhu Junjun, executive director of the Product Development Department of the China-EU International Exchange, believes that the liquidity of European financial markets is the main reason why the stock market has reached a new high.” With the coronavirus still raging Europe, the ECB continues to buy bonds from the market, release liquidity, and continue to implement various liquidity support programs related to the pandemic while maintaining its low interest rate policy.”
The German Business Daily commented that the expectation of economic fundamentals entering a cyclical recovery, as well as signs of improvement in the pandemic, have strengthened investors’ confidence in the stock market.
In terms of Asia-Pacific stock markets, since March last year, despite the continuous spread of the pandemic in Japan and a sharp decline in the economy, the Tokyo stock market has been rising all the way, and the Nikkei stock index has risen by 84% in less than 11 months.
Japan’s economy contracted by 4.8% in 2020, the second largest decline since 1955 was counted due to a sharp decline in personal consumption, investment and exports caused by the pandemic.
Many media and economic people believe that the Tokyo stock market obviously deviates from the real economy, with hidden worries and risks.
Shin Shin Iwata, chief economist of Yamato Securities, pointed out that major economies around the world have introduced large-scale fiscal and monetary stimulus policies, and surplus currencies have flooded into risky assets, which is the main reason why the Nikkei stock index has hit 30,000 points recently.
Yomiuri Shimbun recently published an editorial saying that the rise in the Nikkei stock index did not reflect the actual situation of Japan’s economy. The bubble market that deviates from economic trends is worrying.
Mizuho Securities’ senior analyst Miura Toyo said that once the global ultra-loose monetary policy contracts, the stock market is bound to fall back.
The diverging trend of individual stocks in the Tokyo stock market has also attracted attention.
Market participants said that due to the impact of the pandemic, the performance of listed companies in Japan has been polarized.
With the change of people’s lifestyle under the pandemic, the performance of many information and communication enterprises has risen sharply, but the operating conditions of aviation and service enterprises have deteriorated, and stock prices continue to be sluggish, casting a shadow on the market.