To understand how valuations have soared and the S&P 500 SPX, +1.71% has climbed 98% from its bear-market low, first there needs to be a little history. In a presentation on “TINA and the everything bubble” — a reference to the acronym There Is No Alternative — Longview Economics CEO and chief market strategist Chris Watling pointed out that the post-Bretton Woods financial system lacks an anchor.
As commercial banks healed from the global financial crisis, central banks adopted zero or negative interest rates, and then quantitative easing, to offset the absence of lending and money creation. That in turn has crowded out private-sector ownership of private-sector-listed assets and pushed market participants up the risk curve.
“I think what we’re going to get over the next six to nine months is a backup in bond yields, because the economy’s accelerating as the pandemic turns into an epidemic, and therefore money is coming out of bonds going into equity markets in the first phase through to the middle of next year, maybe a bit longer,” said Watling.
Goldman Sachs GS, +1.27% is among a host of banks due to report results. Alcoa AA, +0.41% shares rose 6% after the aluminum producer said it would pay its first dividend since 2016 and announced a $500 million stock buyback, as it reported stronger-than-forecast results.
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