The stock rally this year could go on until the end of the year, said Larry Hathaway, senior economist and chief investment strategist at GAM.
Since the beginning of the year, the DAX index has grown by 16%, the S&P 500 added 15%. At the same time, both markets set record after record. Meanwhile, emerging markets, such as Brazil, have shown growth of 20%, writes CNBC.
This is happening against the background of stable economic growth, low inflation, high corporate profits and continued support from the monetary policy of central banks, despite the efforts of a number of regulators to gradually curtail incentives.
Investors still expect the tax reform proposed by US President Donald Trump to be adopted by the end of the year. This may give another impetus to the demand for risky assets. The prospect of a major tax reform has been one of the factors contributing to the recent rise in US stocks, as tax cuts were expected to support companies and provide an incentive for the economy.
“The biggest risk for investors until the end of 2017 is a decrease in growth potential in the stock markets. Some consider the stock markets and the value of assets that experienced strong growth in 2017 to be overvalued. Nevertheless, the (economic) momentum is a clear driver in the short term for all markets, including stocks, and there is a feeling that we can see a further surge in stock prices in the last quarter, which many investors may not be ready for, "wrote Larry Hathaway last week in a letter quoted by CNBC .
The upward trend in stocks does not seem to stop in the near future, despite a gradual increase in interest rates, says Janos Kontopoulos, global head of the UBS macro strategy.
"2017 is a key example of how returns can rise slightly, P / E (price / earnings ratios) can be moderate, and stocks can provide high returns at the same time. So far this is due to growth (of the economy), and inflation is not accelerating too sharply, we consider this (trend) stable, "the strategist wrote in the bank's forecast for 2018.
Most analysts share inflation concerns. Although UBS estimates that the risk of a sudden surge in inflation is low, it can be triggered by factors unrelated to economic growth, such as a jump in oil prices.
Among other risks, analysts often mention: high asset value; record low volatility, which is often seen as a sign of excessive calm for investors; geopolitical factors, such as the situation in North Korea or the upcoming elections in Italy.