Sentiment remained upbeat again today, as the rally on Wall Street stretched for the sixth consecutive day. The S&P 500 was inches away from hitting a new record high, while other US indices also climbed along with European shares. The positivity was in part due to mostly encouraging company earnings results, while rising crude oil prices boosted energy stocks and Bitcoin hit fresh records, which further supported risk sentiment across the board.
Source: ThinkMarkets and TradingView.com
Reflecting investors’ insatiable appetite for risk,
Bitcoin hit a new all-time high earlier, sending crypto-related shares higher with BITO – the newly-launched Bitcoin-futures-backed ETF – rising another 4% shortly after the markets opened. Crypto investors are sensing that something big is happening with more money being poured into the newly-launched BITO ETF. All this is helping to underpin expectations that more retail and institutions are going to get involved, and thus demand for Bitcoin, Bitcoin futures and ETFs are going to rise further. Indeed, after the successful launch of BITO, regulators in the US and elsewhere will be less resistant to more Bitcoin and other crypto ETFs. As a result, I expect we'll see increased institutional adoption of bitcoin and crypto as an investment vehicle going forward.
For equity investors, it appears as though investors
have forgotten about inflation, higher taxes and other risks that the economy is facing either right now or in the months ahead. Concerns over higher prices and lower economic growth – or stagflation – had weighed heavily on the markets in September. But with those losses having been recouped, almost entirely, it appears as though investors are more optimistic about growth than inflation.
We have had some
decent economic numbers from the US of late, such as the ISM manufacturing and services PMIs, as well as retail sales. Meanwhile on the jobs front, the unemployment rate has fallen further and wages have improved more than expected. What’s more, the latest jobless claims data have fallen to fresh post-pandemic lows. The world’s largest economy is thus ticking over nicely, keeping hopes
Also helping to boost sentiment have been
central bank officials who have started to acknowledge the inflation risks, but at the same time have also indicated that
only modest policy tightening will be needed. Previously, investors had feared that if central banks had pursued aggressive policy tightening, this might have derailed the economic recovery completely. But apparently, investors are now no longer so fearful about those risks. This is something that might come back to haunt investors at some point down the line.
At the time of writing, though, European stock indices were also rising along with US indices and cryptos. Sentiment on Wall Street has been
supported by stronger earnings results. Last week, US banks reported above-forecast numbers, while
Verizon Communications shares rose on the back of its results today. Not all companies rose, however, with
Novavax plunging on another vaccine delay and
Netflix investors were disappointed with an underwhelming outlook. Attention will be on
Tesla, which will report after the close tonight. Meanwhile, earnings from Europe are also coming in thick and fast, with
Nestle results boosting shares of food and beverage companies and
Deliveroo (wait for it…) delivered (I know, I know) a faster growth outlook.