Global stocks hit new peaks

Global stocks have hit new highs with American and European stock markets leading the way.

"The bull [is] in full snorting mode," says Vito Racanelli in Barron's. Global stocks, as measured by the FTSE All World index, hit a new record this week. In the US, the S&P 500 hit a new peak of around 1,900, while the Dow Jones index ploughed ahead to the 17,000 level. Meanwhile, in Europe, stocks have hit a new six-year high.

The latest surge came as the US employment situation continued to improve (see chart below), while GDP growth in Japan was unexpectedly strong. Investors also started to pencil in a move to full-blown money printing in the eurozone, after European Central Bank boss Mario Draghi took a range of measures to head off deflation.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

But despite signs of recovery, markets also expect central banks to keep monetary policy fairly loose. Although the US economy "is going to be getting a bit better... we're not going to have runaway growth", says Robert Doll of Nuveen Asset Management.

So the Federal Reserve will not be forced to wind down its quantitative easing (QE), or money-printing programme, any faster than expected. So the pattern of the past few years endures: growth is returning, but it is still shaky enough to warrant easy money from central banks.

Advertisement
Advertisement - Article continues below

And any future weakness would, investors assume, be met by the central bank "turning up the dial on the funny-money machine, and thus stock prices, anew", says Liam Halligan in The Sunday Telegraph.

695-global-stocks

The question is how much longer this game can continue. As we've noted a number of times, equity prices and valuations have raced ahead of earnings on both sides of the Atlantic. But markets can detach themselves from the fundamentals for several years before they "collapse under their own weight", says Fidelity's Tom Stevenson.

With the Fed still printing, Japan's central bank prepared to do more, and QE apparently in the offing in Europe, there is still plenty of easy money potentially in the pipeline. Bears and short-sellers should beware: as John Maynard Keynes said, "markets can remain irrational longer than you can remain solvent".

Advertisement

Recommended

Visit/517688/the-british-equity-market-is-shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Visit/511212/reasons-for-investors-to-be-bearish-but-stick-with-the-stockmarket-bulls
Stockmarkets

There are lots of reasons to be bearish – but you should stick with the bulls

There are plenty of reasons to be gloomy about the stockmarkets. But the trend remains up, says Dominic Frisby. And you don’t want to bet against the …
17 Jul 2019
Visit/510684/good-news-on-jobs-scares-stockmarkets
Economy

Good news on jobs scares US stockmarkets

June brought the best monthly US jobs growth of the year, but stockmarkets were not best pleased.
11 Jul 2019
Visit/510135/trade-war-ceasefire-boosts-stockmarkets
Economy

Trade-war ceasefire boosts stockmarkets

Stockmarkets sighed with relief after the G20 summit in Japan brought a handshake between Donald Trump and Xi Jinping.
4 Jul 2019

Most Popular

Visit/investments/stockmarkets/601030/markets-are-starting-to-realise-just-how-bad-the-coronavirus-crisis
Stockmarkets

Markets are starting to realise just how bad the coronavirus crisis will be

As governments around the world throw everything including the kitchen sink in the fight against coronavirus, markets are reaching the “moment of maxi…
23 Mar 2020
Visit/investments/stockmarkets/601028/stockmarket-crash-more-to-come
Stockmarkets

Stockmarket crash: more to come

The stockmarket crash was hard and sudden – and it might not be over yet. But while the short term outlook is awful, says Merryn Somerset Webb, that d…
23 Mar 2020
Visit/economy/601027/money-minute-monday-23-march-will-whatever-it-takes-be-enough
Economy

Money Minute Monday 23 March: will “whatever it takes” be enough?

As we start to see the damage that the shutdown is doing, Money Minute looks at central bank measures to counter it.
23 Mar 2020
Visit/517625/tr-european-growth-trust-why-investors-shouldnt-overlook-europe
Sponsored

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019