According to stock market analysts, the rally in global stock market prices is about to end. They believe that a correction in prices will occur by the end of this year, and gains will be very limited in the coming months.
The MSCI World Equity Index, which is responsible for tracking shares in over 50 countries, claims that the Covid-19 recovery is almost 90% complete. As a result, the price rally is now slowing down.
Another reason for a struggling rally is the rising Delta variant infections and the uncertainty around the US Federal Reserve’s decision to limit the purchase of further assets.
The Head of European Equity Strategy at Barclays believes that the coming months will see macro-negativities of the world context affect the global stock market prices. According to him, economic growth and excess liquidity are expected to continue for the medium term at least. Investors will most likely continue to ‘buy the dip’ for the next few weeks. But the lack of a major correction in the last 12 months is also making some traders anxious.
Last week had seen global stocks plummet to their lowest since June, but prices have recovered well since then. However, most analysts still believe that a correction is likely by the end of this year. They believe that doubts about the US government’s $3.5 trillion expenditure and the fear of inflation forcing down stimulus measures of central banks are curtailing the risk-taking mentality of investors.
Analysts feel that the global market is running on large amounts of stimulus provided by different governments, and it is not sustainable in the long run. But the majority of analysts do agree that corporate earnings will keep increasing for the next 12 months.
Prices are still high at present. But the global market situation is gradually becoming more uncertain, with fears of correction slowly permeating among investors.