MFS: ‘Starting shot long -term rally coming’
The global stock markets seem to be preparing for a new cycle. If we interpret the signals properly, the starting signal will soon sound for a long -term rally, says investment strategist Benoit Anne from asset manager MFS.
Central banks worldwide open the money tap. Interest rates follow each other quickly and the number of countries that reduce interest rates is approaching historical records. Even the American Federal Reserve has been hooked up again, with further interest rates in prospect.
“This “Run It Hot“Approach to monetary policy leads historically to higher price-win ratios and therefore to higher stock prices. But that’s not the case,” says Anne. The budget policy also has a major boost in many countries. Despite the already towering deficits, the US, the EU, Japan and China are planning substantial extra expenses.
Beurshausse
Moreover, in the US there is a deregulation offensive, supplemented with an additional program that should stimulate investments. Add to that the technological innovation (AI), and you get a cocktail that can easily unleash a new stock exchange.
“At the same time, however, new risks of possible bubble formation also arise. History shows that bubbles often arise when cheap money, technological breakthroughs and relaxed regulations come together. And although this mix can feed a sturdy rally, the party usually ends as soon as central banks put on the reins.”
In short: according to the strategist we may be in the early phase of a new Zeelenhausse. “Investors would like to position themselves well for higher valuations in the next twelve months. But it is important to keep a cool head, because speculative excesses are lurking.”