Even Eeyore would join this stockmarket party

Large JOBS banner on US Chamber Of Commerce Building

US unemployment has fallen to 6.7% from 15% earlier this year

(Image credit: © Alamy)

published 11 December 2020

US investors are the most bullish than they have been in two decades, report Rita Nazareth and Claire Ballentine for Bloomberg. The CBOE Equity Put/Call Ratio, which measures trading volume in put and call options (bearish and bullish bets respectively) recently hit its lowest level since July 2000. America’s S&P 500 reached a new-all time high last Friday, while early this week US markets were cheered by signs that congress could be set to approve a $908bn stimulus package.

The S&P 500’s recent high came on the back of employment data showing that America’s rapid jobs recovery slowed last month. Still, US unemployment hit nearly 15% earlier this year, but is now down to 6.7%.

Analysts forecast that S&P 500 earnings per share will rebound by 22% next year, following this year’s 15% fall, says Jon Sindreu in The Wall Street Journal. That looks “reasonable”; the year after the 2009 crash saw profit growth of 40%. The worry is for subsequent years. About 48% of S&P Composite 1500 companies are trading on a higher valuation than they did at the end of 2019. A V-shaped recovery next year is one thing; the idea that America Inc. will be more dynamic in 2022 than it was in 2019 looks much less sure.

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November’s euphoria reminded me of the dotcom boom, says Tom Stevenson in the Daily Telegraph. Europe’s markets gained 15% last month, giving a younger generation the closest thing to a “full-blooded melt-up” they have ever seen. Shares are high on a “cocktail of stimulants” from massive fiscal and monetary support to vaccine news. “It’s never a good sign” when there is almost no one questioning the bull story, but so contagious has the optimism become that even “Eeyore would be tempted to join in the fun”.

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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.