Markets continue to push higher as investors take solace in the fact there is likely more fiscal and monetary stimulus to come, especially as we start to see confirmation of recession. This recession is likely to be quite different than others in the fact that governments of the world are stepping in like never before.
Markets continue to be resilient as investors continue to have a sense of security from QE infinity and other Fiscal and monetary policies. In saying that, there are still massive risks out there as the full effects of the COVID-19 driven recession is being masked by government payments and stimulus.
The recovery in markets seems to be extreme considering we are in a recession, but don’t forget that markets are forward looking. People are starting to ignore current valuations and earnings expectations and look to what they can be in a few years’ time once we see a recovery.
Markets are seeing the light at the end of the tunnel and are being held up by;
- Economies reopening
- Hopes of a vaccine
- Low interest rates with the view they are going lower
- Bond buying, to keep the Credit markets ticking along
- Increased unemployment benefits and programs to help keep staff employed that would have lost their jobs otherwise
- Hints of further stimulus on the way.
Earnings sentiment is still exceptionally low, with many analysts downgrading expectations. If sentiment continues to increase around lockdown relief, we could see a shift here later in the year. But for now, things are expected to be negative through the July – August reporting seasons. Future prediction on growth at this stage seems to be weak through the rest of this year and most of next, where it is expected to jump strongly.
With the U.S rallying hard once again last night we have positive leads for our session today. The SP500 hit their resistance at 3130, and we are poised to hit ours at 6000 on open.
We should stall at roughly 6000 today, unless we see strong gains from U.S futures which could cause us to push through as we preempt the SP500’s break of their level at 3130.
US markets rose again overnight, with the NASDAQ 100 tech index spending periods of the session above its highest ever close, though it did pull back. The rally was strengthened by a report showing fewer job losses than expected throughout May. The rallies led global equities to the highest average price-to-earnings ratio since the early 2000’s.
Stocks remain optimistic that not only will economies return to normal over the next 12-months, but also that the massive stimulus will spur further growth moving forward than would otherwise have been achieved. US listed Oil and Gas and Financials stocks were the strongest performers again overnight, while Healthcare was the only major sector to close in the red.