Another strong fear factor is lifting stocks: The fear of missing out on this seemingly never-ending rally.
The company’s profits for the second quarter were extremely strong. While earnings growth is expected to slow slightly in the second half of the year and into 2022, earnings growth is still likely to be fairly solid for the foreseeable future.
Investors also have no choice but to continue buying stocks because other assets simply don’t look appealing.
“There’s ridiculously low bond yields. How do retirees and pension funds manage that?” Eric Diton, president and chief executive officer of The Wealth Alliance, said in an interview with CNN Business. “They have to switch to stocks. I’d rather own big dividend payers like Pfizer or Verizon.”
The Fed won’t turn the market upside down anytime soon
But there is no guarantee that the Fed will rush to make changes to policy.
Questions about whether more stimulus will come from Washington and concerns about how quickly Congress will act to raise the debt ceiling that would allow the government to borrow more money could keep the Fed on the sidelines for longer. , this will also support stocks.
“The Fed wants to know the stance of fiscal policy before committing to a direction for monetary policy,” said David Kelly, global strategist at JPMorgan Funds.
“As the negotiations continue to drag on, there is a greater risk of errors in the political calculation, and the Fed wants to work through this uncertainty before it begins to tighten,” Kelly added.
The team at global investors themselves argue that the Fed will likely stay the same until early next year.
“Investors should not expect the Federal Reserve to change their plans to begin easing, and we reiterate our view that the Fed is likely to begin easing as early as 2022,” the analysts said. principal analyst wrote in a report Monday.
They added that “investors shouldn’t worry that runaway inflation will skew the positive trajectory” toward riskier assets like tech stocks and other high-growth sectors.
Delta variant likely won’t repeat 2020 outage
Some strategists aren’t too worried about the Delta variant having a big impact on the economy or earnings. With millions of Americans vaccinated, the chances of businesses adopting the same stringent lockdown measures as they did in the spring of 2020 seem remote.
Glenmede strategists Jason Pride and Michael Reynolds said in a Monday morning report: “Expect a moderation but not a stop in the recovery as governments and consumers adjust to an increase in Delta variant”.
Business leaders also remain upbeat, which bodes well for the stock.
According to a survey of corporate executives, business owners and private equity investors released Monday by investment firm Stifel, many companies are still planning to raise money. face for mergers and other strategic initiatives in the near future.
“There is a sense of optimism after a long hiatus caused by Covid,” said Michael Kollender, chief executive officer of Stifel. But he added that companies must adapt to a rapidly changing economy, with labor shortages and tax reform the two main challenges.