US stock market: a further upturn amid the economic recovery or an outflow of investors in favor of the debt market? - Kakiforex | Forex markets for the smart money. US stock market: a further upturn amid the economic recovery or an outflow of investors in favor of the debt market? US stock market: a further upturn amid the economic recovery or an outflow of investors in favor of the debt market?

April 1, 2021

US stock market: a further upturn amid the economic recovery or an outflow of investors in favor of the debt market?

 Recently, there are quite a lot of events in the world that affect the economy and markets. In principle, the whole last year can be called crazy. The markets were faced with a situation in which the usual factors and forecasts were no longer working. But now that the economy is slowly recovering, and the vaccination process has begun around the world, you can think about getting everything back on track. Oddly enough, the US stock market continued to grow during the crisis, which has lasted for more than a year. Shares of many companies, especially tech giants, continued to rise in price. Such behavior of the market, completely illogical for the time of crisis, made many experts talk about the "bubble" that has inflated in the stock market. And indeed, the "bubble" has a place to be. After all, in the current conditions, what does the growth in the value of shares mean? Only that the demand for them is increasing.


Accordingly, in principle, it does not matter whether there is a crisis in the world or not. There is no less money. If this money is redirected to the stock market, then the stock goes up. That's the whole mechanism. But does this increase in the value of shares reflect the real state of affairs? After all, in a crisis, the sales of many companies decline. In any case, the companies themselves are not expanding at the rate that their shares are growing. We have already talked about the profitability of the shares of the main tech giants. It doesn't even reach 1%. Therefore, buying shares for the sake of dividends is stupid. The income will not even cover inflation. Accordingly, investors invest in shares not for the sake of dividend income, but for the sake of increasing the value of the shares themselves. The "bitcoin principle", which in itself is not worth anything, but is growing, because the demand for it is constantly growing.


The most interesting thing is that many experts believe that the stock market will continue to grow during 2021. This opinion was voiced by representatives of Barclays, Deutsche Bank, and other investment banks. All of them expect the S&P 500 index to continue to grow and believe that the US stock market will attract new investors amid the rapid pace of the US economic recovery. Also, many experts note that, given the trillions of dollars that are poured into the US economy for the second year in a row, people have accumulated a fairly large amount of money "under the pillow" and the deferred demand is now very large. Some of these funds can go to the stock market or cryptocurrencies. Of course, this does not mean that all Americans who received $ 1,400 from the government will now rush to buy shares of Tesla or Apple, but a certain part of the money can flow to the stock markets.


At the same time, the yield of 10-year treasuries in the United States has recently resumed growing. Yesterday, it was already 1.732% and may continue to grow in the near future. Thus, some experts predict that the debt market may soon begin to attract money to itself. The outflow will occur from the stock market or the cryptocurrency market. The yield on 10-year treasuries reflects the high expectations of investors for the growth of inflation in the United States in the coming years. If the yields of various treasury bonds continue to rise and overtake the potential inflation for the coming years (2-3%), they will become much more attractive than Apple or Tesla shares, which are not only overbought but also offer a yield significantly lower even than the current level of inflation.