If you’ve been following some of the major financial gurus out there, it seems that a depression is just around the corner. With warning signs such as the inverted yield curve, weakening manufacturing data from China, the growing national debt, as well as the trade war tensions, it’s easy to see why many think that we’re poised right over the financial cliff. Whether that’s true or not, the markets don’t really think that to be the case, with major stock indexes around the world hitting fresh records on Monday.
In particular, the U.S. Dow Jones Industrial Average, S&P 500, and the NASDAQ all ended the day at their highest levels ever, hitting fresh records for what’s already been a record-breaking year already. Across the Atlantic Ocean, European indexes have reached new highs, with the benchmark Stoxx Europe 600 index hitting a new high not seen in over four years.
The Dow Jones ended the day up 0.4%, hitting 28235.89, while the S&P 500 is up 0.7% to 3191.45 and the NASDAQ up 0.9% to 8814.23, The Stoxx Europe 600 ended the day up 1.4%, with the index climbing an impressive 24% so far this year.
Overall, sentiments seem to have improved in the market a fair bit. U.S. business activity has hit a five-month high this month, and new reports have shown a surprising upturn in Chinese manufacturing data despite what has seemed to be signs of a downturn in the Asian superpower’s economy. Specifically, factory production and consumer spending have gone up in the month of November, something which wasn’t expected by most financial analysts on Wall Street.
“People feel relieved that there is clarity over some of these issues that had been hanging over the market. The continued path of least resistance is going higher,” said Michael Stritch, chief investment officer of BMO Wealth Management according to The Wall Street Journal. “Unless we get any bad data I think the market is going to continue to ride because this was a big, big hurdle cleared for markets with this ‘phase one’ deal,” added Etsy Dwek, who heads global market strategy at Natixis Investment Managers.
At the same time, these gains are the continuation of a series of consecutive green days following the U.K. election where Boris Johnson’s Conservative Party won a majority in the country. As a result, it confirms that the U.K. will be leaving the European Union, something which has cleared up a bit of uncertainty surrounding the situation, especially considering that a no-deal exit could have economic ramifications.
Back last week, the Federal Reserve also commented that it plans to keep interest rates at current levels until 2020. Coupled with the fact that the trade deal seems to have been making solid progress (besides a couple of areas such as agricultural purchases, for example), things seemed to be getting better in the global economy.
While market bears will say that these new record highs could be setting us up for a fall, which it might, that’s something that still has to be seen. Until then, should remain cautious but not overly fixated on the possibility of a looming catastrophic collapse.
