S&P 500 Index: There is room for a 3% rise before reaching equilibrium – Natixis
|Analysts at Natixis estimate that the US stock market index is almost at its equilibrium level, but that the eurozone index is still 20% below its equilibrium level.
Key quotes
“The economic policy being conducted (massive fiscal deficits monetised by central banks) has led to a sharp increase in the money held by non-bank economic agents, since this policy is equivalent to helicopter money (transfer payments to households and companies through money creation). This will result in a portfolio rebalancing.”
“In the medium-term, the share of money in wealth must remain stable, equal to its optimal share. This means that total wealth increases in line with the money supply and that share prices rise in line with the money supply.”
“We see that the proportionality between the money supply, wealth and the stock market index implies in the United States, that equilibrium wealth is currently 21% higher than actual wealth and the equilibrium share price (S&P 500) is 3% higher than the actual share price and in the eurozone, that equilibrium wealth is currently 26% higher than actual wealth and the equilibrium share price (EuroStoxx) is 20% higher than the actual share price.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.