Finance

Analysts: US stocks stand on the edge of the cliff

ileod 6 months ago 2 min read

The S & P 500 index is hovering on the edge of historical highs, and in the process of its rise, it has been dismissive of the uncertainty brought about by the new outbreak. on Friday, the S & P 500 index closed up 0.02%, up 0.6% for the week. On Wednesday and Thursday, the S & P 500 index briefly broke through the February 19 closing high of 3386.15, but failed to hold. while it’s hard to say that the rally in the world’s most important stock market benchmark index has stalled, it’s close to a record closing high, at least unsettling for many investors. James Montier, a behavioral economist and member of the asset allocation team at GMO, wrote in a recent research paper entitled “the reasons for optimism: certainty, absurdity and fallacious narratives,” I have never seen a market with such high valuations in the face of great uncertainty. ” he added that the U.S. stock market seemed to have drunk too much of the exciting drink. Montier believes that in the face of the unprecedented economic disaster caused by the most serious epidemic in modern times, market participants may be too careless about the stock index’s soaring. “it’s like Mr. market taking tail risks and setting prices.” “It looks like wild wolf running down a cliff,” Montier wrote Montier’s concern about the speed of stock market recovery is a view shared by many investors. How can the U.S. stock market rebound so strongly after an epic slump in March this year? Only during the great financial crisis of 2008-09, we saw a similar rapid and powerful V-shaped rebound in the market, said Montier. investors still pay close attention to the future trend of US stocks. The further fiscal stimulus plan of the U.S. Congress, international geopolitical relations and the risk of coronavirus transmission in autumn and winter are several issues that market participants are worried about urgently. a review of the funds run by billionaire George Soros on Friday showed that he increased his holdings in financial companies including Bank of America, Morgan Stanley, Wells Fargo, Citigroup and PNC Financial Services. If the economy fails to achieve the V-shaped recovery predicted by the stock market, these stocks will suffer the most. at the same time, according to public documents, Warren Buffett’s Berkshire Hathaway has reduced its holdings in many of the same companies and bought heavily in gold producer Barrick gold Corp gold. so, who is right about the future? Montier offers some advice: “value investors accept uncertainty and require a margin of safety to reflect the unknown.”