The last 18 months has been one of the best runs in stock market history, with the MSCI All-World index nearly doubling since the COVID-lows of March 2020. This has largely been driven by the unbelievable run in US large-cap stocks. But it isn’t just stocks that have done well, everything from cryptocurrencies to property have seen unbelievable runs of late.
Two articles that came out in the past couple of days cover this phenomenon. There are many interrelated causes for this recent boom – the unprecedented levels of stimulus, record low interest rates, the boom in retail investors and the free access these retail investors have to options (In America, the ratio of calls to puts is the highest since June 2000, shortly before the Dotcom bubble burst).
In the face of such incredible stock market performance, many short sellers are getting out of the market. A rising tide has seen nearly 90% of the S&P 500 stocks go higher this year, and the flood of cheap money has allowed nearly-bankrupt stocks to hold on for longer.The question is, how long can it last?
At this stage, the overwhelming sentiment from market analysts is that while the market is running hot, company fundamentals are doing just enough to keep pace. So there isn’t a lot of panic from Wall Street. Instead, just amazement at what is playing out across all of these different asset classes. This amazement should come with a warning though. We are living in unprecedented financial times, and if we learnt anything from early 2020, it is that the market moves a lot quicker these days. So it is important to watch this space. This incredible run across all asset classes cannot last forever, so at some point, the ride is going to get a little bumpier.
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