The original title: U. S. stocks have repeatedly hit new highs, behind the "push" only the Federal Reserve?
The stock market on Wall Street hit another all-time high, at the same time
The Federal Reserve (Fed) will hold a seminar in Jackson Hole to discuss wealth inequality, and the Fed's role in driving asset price inflation is once again under scrutiny. Admittedly, trillions of dollars
Asset purchases, with years of zero interest rates and 10-year bond yields just above the official rate of 1%, pushed up share prices. But some analysts believe the impact of the Fed's release may have been exaggerated.
Us stocks continue to rise, setting new records and earnings are at multi-year highs
Wall Street, which is dominated by technology stocks, has benefited more from low interest rates and strong economic growth.
The surge in the US stock market helped fuel the fire. The Fed's massive balance sheet expansion is also far less than that of the European Central Bank (ECB) or the Bank of Japan.
(Bank of Japan).
The S & P 500 has more than doubled from its low during COVID-19 's outbreak in March last year, hitting a 51-record high this year. By the end of August, only 1964 and 1995 had hit more than 50 new highs, according to Ryan Detrick, chief market strategist at LPL Financial. He thinks the S & P 500 could hit 78 new highs this year, surpassing the 77 record set in 1995.
Based on 12-month forward earnings valuations, the S & P 500 hit its highest level since 1999 earlier this year, just before the tech bubble burst. Since then, the price-to-earnings ratio has been falling. But it is still above 20, and this is the first time this has happened in most of the past 20 years.
Official interest rates and ultra-low benchmark bond yields make investing in profitable cash-generating companies an attractive proposal. For some investors hungry for returns, riskier stocks are obvious.
The rising proportion of US stocks far exceeds the scale of the expansion of the central bank, and there may still be other momentum in the upward trend.
Many believe it is a natural consequence that the Fed has doubled its balance sheet to $8.3 trillion since the outbreak. The balance sheet now accounts for about 40 per cent of GDP.
At the same time, the world's second and third largest central banks have stepped up asset purchases to combat the epidemic. Their balance sheets as a percentage of GDP are much higher than those of the Fed. However,
Euro
Regional and Japanese stock markets and valuations are far from that high.
Since the outbreak, the ECB has expanded its balance sheet to $9.5 trillion. The ECB's balance sheet is valued at more than 60 per cent of eurozone GDP. Similarly, the Bank of Japan (Bank of Japan) has expanded its balance sheet by $1.4 trillion to $6.6 trillion, or about 120 per cent of GDP, since March 2020.
However, the Euro Stoxx 50 index is "only" up about 65 per cent from the low of the COVID-19 epidemic and is still 23 per cent below the record high set in March 2000. Euro stocks have a 12-month forward price-to-earnings ratio of about 16. Japan's East Stock Exchange Index (Topix) is 55% higher than the low point of the COVID-19 epidemic, with a price-to-earnings ratio of about 13 times. Both figures are significantly lower than in the United States, suggesting that the factors behind the surge in Wall Street stocks are unknown to the central bank.
Two factors support the upward basis of US stocks
First, the US stock market has a higher proportion of technology and numbers than its global counterparts.
A world of zero interest rates is particularly good for technology companies because low discount rates increase cash flow in the future, because cutting-edge innovation may drive faster growth. By any measure, the big five technology stocks-Facebook Inc, Amazon.Com Inc (Amazon), Apple Inc (Apple), Netflix and Alphabet Inc-CL C-dominate Wall Street. Over the past five years, they have risen more than three times as much as the S & P 500, with a market capitalization of $7 trillion accounting for 21% of the index.
The other is traditional economic growth.
Recently, some optimistic forecasts for the US economic recovery have been downgraded, but the International Monetary Fund still expects GDP growth of 7.0 per cent in the US, 4.6 per cent in the eurozone and 2.8 per cent in Japan this year. Detrick of LPL Financial pointed out that
S & P 500
About 85% of the companies in the index outperformed other companies in the second quarter. Earnings per share in 2021 are expected to increase by 43% over last year.
There is no doubt that the Fed's massive release of water is a major factor driving up U. S. stocks, however, there is still growth brought about by economic momentum and industry advantages in the rally of U. S. stocks. At present, the market is closely watching the risk of the Fed scaling back its bond purchases and raising interest rates, and even fears that the historically high stock market will face the risk of "curtailing panic" as the Fed raises interest rates. However, given the recovery of the overall economic environment, it is very difficult for US stocks to plummet in history.