Stocks hold their strength – will FTSE finally join the fun?
Investors’ insatiable appetite for risk remains intact as we move towards the end of the month. While there is potential for profit taking here and there, the trend is clearly bullish for stocks with several major indices trading near record highs. Sentiment is positive towards stocks and other assets which should benefit from a rebound in economic growth for several reasons. In key economic regions, lockdowns continue to ease and travel and tourism are slowly picking up at a crucial time, with the hot summer months quickly approaching. In addition, huge monetary support continues to flood the financial markets. Most policymakers at major central banks have consistently dismissed concerns about inflation, as the Federal Reserve and the European Central Bank have kept their asset purchase programs at full speed. Knowing that central banks have their backs, investors therefore had little reason to look to bearish equities, with traders looking for momentum happy to redeem every short-term pullback to support them.
Further down the line, if we see more evidence of a marked improvement in US employment and warming inflation, then the Fed could vote more on the tightening, which could then see the currency The US is finally catching a sustainable supply, while concerns about valuations and the potential for earlier -an policy tightening from the Fed and other central banks than expected could return and hurt stocks. But for now, risk is on the menu, traders are capitalizing on this momentum as we end another positive month for equities.
Will the FTSE finally join the world rally?
While most global indices have been rising, the FTSE has been held back to some extent lately, possibly due to the lack of large tech companies in the index and the strength of the pound. In contrast, stocks in continental Europe rose as the ECB remains one of the more accommodating central banks in the market, with its extensive stimulus package. Unsurprisingly, the German DAX has been one of the strongest European indices as it has climbed to new all-time highs several times in recent times.
But will the FTSE catch up? Well, the index has curled into a narrow range in recent days, which means it is potentially gearing up for a big breakout. Considering the uptrend of the other indices, I wouldn’t be surprised if it bursts higher.