Most stock experts have the opinion that there are more positive than negative things that affect the stock market right now, and many believe further price increases are ahead.
Spirits are at top in the global equity markets. The stock rates whiz in the air, and in several places the one record follows the other. The development follows a 2012, which was also an almost terrific year for equities where market prices in general increased by 22 percent. So it has been a good investment to put your savings in stocks in recent years.
But the party is not over yet. It is possible to reap further gains. It is at least the assessment of several of the big banks' equity experts.
Many of the international companies are highly profitable and are in a very strong financial position. At the same time, many of the companies are busy sending money back to shareholders in the form of dividends or share repurchases. As interest rates also are low, it makes the shares attractively priced. Many investors are pressured to keep the shares or buy them up because the alternative is bonds, which have such a low rate that they give a loss after tax and inflation have been deducted.
Many also believe that U.S. growth will accelerate in the second half of 2013 after a little lethargic period of disappointing economic indicators. The U.S. housing market is in significant improvement, and households have now reduced their debt to the 2003 level. Therefore, it is likely that consumer spending in the U.S. will rise, and it is of great importance for the entire U.S. economy.
Earnings greater than ever before
It is the season for financial statements for the first quarter, and in the U.S., earnings of major corporations are larger than ever before. The total surplus is expected to reach 13 percent of the U.S. gross domestic product (GDP), which is the highest proportion in history.
One reason for the high profitability is that they are saving big on costs and the sale is at the same level or slightly lower than last year. It is particularly the wages of employees which have fallen, although productivity has grown. Businesses, in other words get more out of their employees, but pay less.
Wages are under pressure
It is particularly the high unemployment rate, which reached over ten percent of the workforce in 2009, that has put wages under pressure. But currently, unemployment is again on the way down and now stands at around 7.6 percent of the workforce. Therefore, it is likely that wage pressures will increase as the unemployment rate falls.
U.S. firms are also extremely solid padded. Since 2007, their cash position increased more than 50 percent, while debt is halved. Therefore the companies in February sent indeed a record $ 120 billion back to shareholders through share buybacks or dividends.
But many expect that companies will soon begin to invest in new activities instead of paying their high earnings to shareholders. This will happen as the economy gets better, and this can help to fuel growth.
In addition, which is extremely important for the stock market, all the world's major central banks currently stand ready to pump money into the economy and keep interest rates down.
Times are bright
It is not just the U.S. Federal Reserve, which is currently set full throttle on monetary policy in this way. The same happens also in Japan and the UK, and partly also by the European Central Bank, which has just put its rate down to 0.5 percent. As long as central banks in this way, flooding the financial markets with money, times are bright for the stock market.
But as always, there is risk for wide fluctuations in the stock market. Prices rarely rise constant over a longer period. There are often times when gains are taking in, and the atmosphere is more acidic. It is among other things an increase in the U.S. debt ceiling after the summer break, which can cause unrest. The same can new indicators that point to economic slowdown.
Equity markets are off to a good start this year, but the economic development is lagging to such an extent that a major correction, or at least quite choppy summer, may lie ahead of us. First and foremost this is a natural break and many are still positive on both growth and financial performance in the second half of 2013.
Japan surprises
But on the other hand, there are also a more positive sentiment catching on in Europe, where politicians in several major countries will focus more on growth rather than just think about reducing the deficit and the high debt. Giving the mood more tailwind, may mean that there will be more speed on the European economy - to the delight of the shares.
Japanese stocks have surprised very much this year. They have risen almost 32 percent since New Year. The Japanese yen has also dropped a lot in price, but even if account is taken of this, there is now a gain of 18 percent to back down. It's the new Japanese government, which has caused the Japanese equities to wake up from their hibernation.
Continuing development can help Japan become the biggest stock exchange comet this year.
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