Equity market indices have risen impressively in the recent period. Some investors are concerned about this rise in share prices and fear a downward correction. Analysts at Natixis believe that on the contrary, equity markets will continue to rise.

Corporate profit margins are very high 

“Despite the rise in the prices of commodities and companies’ intermediate consumption and, in the US, rising labour costs, corporate profit margins and earnings are very high. In Europe, labour costs are not accelerating, while companies in the US are able to pass on increases in their costs to their selling prices. So given the downturn in the prices of many commodities, profit margins will remain high.”

Long-term interest rates will remain low, well below growth rates

“The Federal Reserve has decided to reduce the size of its Treasury purchases, but will not raise the Fed Funds rate until 2023. Given, moreover, that it is the size of the central bank’s balance sheet that determines long-term interest rates, long-term interest rates will remain low in the US. The ECB will continue its bond purchases in 2022 and will not raise its key interest rates until 2024. The ECB appears to have no intention of exiting its highly expansionary monetary policy. Long-term interest rates will therefore remain much lower than growth rates for at least another two years.”

Abundant liquidity remains to be invested in equities

“After a period of vigorous money supply growth, portfolio rebalancing is complete once the proportion of money in wealth has returned to normal. As long as the proportion of money in wealth is abnormally high, the prices of the other asset classes that make up wealth (including equities) will continue to rise.”

 

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD retreats below 1.1300 area as NFP-inspired dollar weakness fades

EUR/USD jumped to a daily high of 1.1333 with the initial market reaction to the disappointing November Nonfarm Payrolls data but quickly returned below 1.1300. Rising US Treasury bond yields seem to be helping the dollar stay resilient against its major rivals. 

EUR/USD News

GBP/USDdrops to 1.3250 area as dollar regains strength

GBP/USD spiked above 1.3300 in the early American session with the initial market reaction to the gloomy US November jobs report. However, the greenback regathered strength on hawkish Fed commentary and forced the pair to turn south.

GBP/USD News

Gold struggles to capitalize on weak NFP data, holds near $1,770

Gold spiked to a daily high near $1,780 with the initial market reaction to the disappointing Nonfarm Payrolls data from the US but seems to be having a difficult time preserving its bullish momentum with the 10-year US T-bond yield staying resilient.

Gold News

The bull and the bear case for BTC

Bitcoin price saw a bullish impulse that faced massive headwinds before it tagged a crucial psychological barrier. Bitcoin is likely to experience massive volatility as the situation resolves over time. 

Read more

Cyber Monday 2021 Discounts!

Glued to your trading screen on Cyber Monday? Upgrade your skills by signing up for FXStreet’s Premium service, offered at a discount of up to 50%. Fellow traders have already taken advantage of Black Friday profits. What about you? 

Subscribe now!

Forex MAJORS

Cryptocurrencies

Signatures