What’s Going On Here?We’ll have what they’re having: JPMorgan forecasted earlier this week that the world’s stocks will continue to climb this year. What Does This Mean?2021 was a perfect storm for stocks: demand for companies’ products and services bounced back as countries reopened, while the world’s governments were more than prepared to pump cash into their economies. So much so, in fact, that key stock indexes in the US and Europe rose by 27% and 22% respectively last year, up to near-record highs.
But JPMorgan thinks stocks have further to run yet, mostly because the risks facing the global economy – like stricter Covid restrictions and a Chinese economic slowdown – are either already “priced into” the markets, or simply won’t happen at all. What’s more, the investment bank reckons company profits will keep growing faster than expected and that inflation will cool down in the second half of the year – both of which should push stocks even higher going forward. Why Should I Care?For markets: Don’t get too comfortable.
It’s hard not to feel a little on edge, mind you: a key valuation measure of the US stock market’s 10 biggest companies is almost as high as it was just before the dot-com bubble burst in 2000. And with central banks likely to raise interest rates any day now, stocks are actually looking pretty vulnerable – at least in the short term. Wells Fargo thinks so, anyway: the bank just said it thinks the US stock market could fall 10% in the next few months.
Zooming out: Gold’s old news.
If JPMorgan’s wrong about a drop-off in inflation, investors might increasingly turn to “stores of value” – assets that hold their worth over time. Gold’s been a top choice for… well, ever, but Goldman Sachs predicted this week that bitcoin will keep eating into the big dog’s market share as everyday investors increasingly adopt digital assets. And if that does happen, the investment bank reckons bitcoin could hit $100,000 in the next five years. | 