Money: Bull Still On The Run

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Money: Dave Deruytter ask where does it go from here?

The current bull run of the stock market in the US is the longest in history. It started after the worldwide financial and economic crisis of 2007-2008. The decade-long increase has been fuelled by unprecedented low interest rates and extremely loose monetary policy by the central bank, including the introduction of Quantitative Easing, the Central Bank’s massive financial asset buying programmme.

There was a fear for an end to the bull run in 2018 when the US Federal Reserve started to increase interest rates again. Still, as that increase was stopped, even reversed, the financial markets soon recovered.

In other regions around the world, things are different. Europe hasn’t seen similar consistent gains over the past decade on its stock markets. Economic growth was much lower than in the US – Brexit, a potential trade war and migration issues put pressure on positive sentiment. In China, there has been slower economic growth than previously, due to high debt levels and the trade war with the US. These are all factors that make their financial markets more subdued than in the US. Next to financial assets, real estate investments also did very well over the past 10 years. Real estate has done extremely well around the world, doped by very low interest rates and low unemployment in many countries. The fast-rising number of people in the middle class in developing countries has helped this sector too.

Lower economic growth, low increases in wage and bottoming low interest rates make observers wonder if all of this can continue much longer. Agreed, they were already prudent three years ago – and still the markets powered ahead, notwithstanding a poor year in 2018.

The TINA syndrome? TINA: There Is No Alternative. With interest on savings accounts close to zero and a questionable possibility for positive return in the bond market, what other alternatives does an investor have than to invest in stocks or real estate? Gold or other precious metals? Yes, but they do not yield dividends or
interest income. Crypto currencies or other such assets? As long as the Central Banks do not embrace them, mainstream investors will not move on them. Plus, there are doubts about their real added value over the current currency system.