Investors decide the bull market is back

published 14 November 2019

River Seine in Paris © iStockphotos — France is once again offering a yield on its ten-year bonds

"The pendulum is swinging back", says Michael Mackenzie in the Financial Times. Investors have spent much of this year worrying that the US-China trade war would trigger a "hard landing" for the global economy. Yet though a trade resolution remains murky, markets have suddenly decided that it is time to be bullish. America's S&P 500 has now made five straight weeks of gains, its joint-longest winning streak for two years, notes Stan Choe for The Associated Press. The FTSE All-World index has gained more than 4% in the past month.

The real surprise is that this rally comes against the backdrop of underwhelming US corporate earnings, says Alexandra Scaggs in Barron's. S&P 500 earnings per share are set to decline for the first time since 2016 in the third quarter. That matters because stock valuations are fundamentally based on the profits of the underlying businesses. All else being equal, "when earnings decline, stocks should fall in turn". Yet most analysts have now called a bottom to the earnings slump, says Gunjan Banerji in The Wall Street Journal. Many on Wall Street expect earnings growth to accelerate next year and the US economy to dodge a recession. That is keeping markets in buoyant spirits for now.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.