Bull market quells Wall Street fears
Wall Street Fear Wanes As Stocks Rise Amid Global Coronavirus Pandemic.
Cboe Volatility Index known as «fear indicator» (“fear gauge”) Wall Street is close to its lowest level since late February this year, and options markets are showing diminishing fears of a short-term decline in stocks.
Achievement S&The P 500 also boosted its new highs by statements from some of the largest Wall Street banks, including Goldman Sachs, UBS Global Wealth Management and Morgan Stanley, which have become more optimistic about the stock and urged clients to remain open to buying stock. According to one definition, the index closed at an all-time high on Tuesday, marking thus the beginning of a bull market.
Investors should heed their advice as Almost 80% of fund managers surveyed by BofA Global Research, the highest level in more than a decade, expect the global economy to grow in the next year. The poll also showed a drop in the level of cash allocations, which is another sign of growing optimism..
The growing optimism contrasts with the fear and discouragement that reigned on Wall Street just months ago, after S&The P 500 fell 34% in just 23 trading days, and the economy went into a recession that turned out to be the worst since the Great Depression..
While financial pain remains acute for many Americans, monetary support from the Federal Reserve and expectations for success in the fight against the coronavirus pandemic have made investors more confident that they are betting on the future, he said. Quincy Krosby, Chief Markets Strategist at Prudential Financial.
«There is a market that sees us getting closer and closer to a more normal world», – she said.
Options markets are one area reflecting the waning of investor anxiety. Demand for protection against falling US stocks has dropped 30% or more as volatility has eased in recent months, said Paul Sandhu, Head of Quantum Solutions for Mixed Assets BNP Paribas Asset Management in Asia Pacific.
«Fear has definitely diminished in the (last) couple of months», – he said.
Meanwhile, sales of protective put options on individual stocks surged last week, said Christopher Murphy, Co-head of derivatives strategy, Susquehanna Financial Group. Put sellers make a profit unless the underlying stock drops to a certain level.
Selling puts suggests investors are less concerned about the reverse move, Murphy said..
According to Deutsche Bank, the futures markets are now at their highest net long position since early March, with both large and small cap stocks growing..
The increasingly optimistic positioning is in line with reports from the major Wall Street banks. Goldman Sachs, for example, raised its target for S earlier this week.&P 500 at year end from 3,000 to 3,600, citing expectations for excessive growth in corporate income and US gross domestic product next year.
The share price fell since Tuesday, but several market strategists have said they see pullbacks as common and not a sign of overbought stocks.
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However, there are many reasons for investors to worry, and some remain skeptical about buying close to all-time highs..
One concern is the potential for market volatility stemming from the delay or possible challenge of the US presidential election in November. The Dow Jones Industrial Average fell 5% in two weeks following a recount in the 2000 presidential election, UBS notes.
Other risks include resurgence of COVID-19 cases, delays in vaccine development and distribution or delays by legislators in providing additional incentives to still suffering the economy.
In part, this uncertainty is reflected in the price of gold, a popular haven for investors, which surged to record highs this month. Prices Aurum recently gained additional gains after Berkshire Hathaway Warren Buffett revealed her share in Barrick Gold Corp.
However, some investors believe the outlook for economic recovery outweighs these risks.. Chief Markets Strategist Truist / SunTrust Advisory Services, Keith Lerner, keeps forecast "above the market" on American shares.
«We don’t clear anything from the table», – he said. «We are following the main trend, which is still higher».
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