S&P 500 Index: Four reasons to sustain positive momentum – DBS Bank
|Data from EPFR Global shows US registered funds inflow of $179 B YTD and this far supersedes total flows of $27 B registered for the entire 2020. The strong flow of funds into the US underlines broad-based conviction on the market as the domestic economy continues to recover strongly from the ashes of the pandemic. Economists at DBS Bank expect the positive momentum for the S&P 500 Index to sustain in the coming months for four reasons.
Low daily new CVOID-19 cases and high vaccination rollout positive for US economic outlook
Strong macro momentum
“Macro momentum in the US remains robust and this is evident from the ISM Manufacturing, which has maintained above the “50-mark” (at 60.7 in April). US unemployment has also been falling steadily (at 6.1% in April) and this augurs well for the outlook of domestic consumption.”
Strong earnings momentum
“US earnings stay robust as 87% of the companies reported positive earnings surprise in 1Q21, led by Technology and Financials. We expect the strong momentum to persist.”
Monetary accommodation
“The Federal Reserve’s ultra-loose monetary policies remain as policymakers continue to view the recent spike in inflationary pressure as transitory and hence, ruling out the likelihood of premature policy tightening.”
Improving COVID-19 situation
“The sharp downtrend in daily new COVID-19 cases and high vaccination rollout suggest that the government has put the pandemic under control, and this is positive for the US economic outlook.”
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