Global Stock Market Rally Shows No Sign of Waning

With new central bank stimulus measures and strong data coming in from the United States, the global stock market rallied on Tuesday, and there’s no stopping the trend so far. And there’s no stopping the trend so far. The biggest rise in house prices in the US in seven years was seen as Wall Street closed 0.7% higher. The S&P 500 closed 0.6% higher. In the meantime, the FTSE 100 in London closed 1.6% up as Dax indexes in Frankfurt, Germany closed 1.2% higher and Cac 40 in Paris, France closed 1.4% up. In Tokyo, Japan the Nikkei 225 index closed 1.2% higher.

All around the world

The past six months have actually been an optimistic period for global stock markets. Japan’s Nikkei 225 indexes and the UK’s FTSE 100 are at the highest level of trading in five years. Germany has also achieved a new record high. All across Asia the indexes ended higher as well, including China’s Hang Seng. Eyes are now keen on beholding next day’s trading to find out whether the levels are maintained.

Driving factors

There is not just one factor that has been driving the global stock Market rally. A combination of factors is at play here, but the agreement is that the stimulus programs that the central banks have aggressively implemented have been successful in boosting the growth. There is no indication yet that these programs would wind down as central banks pump money into financial markets. Monetary policy is considered by many as the main driver of this year’s rally.

Banks are buying by the trillion

The Bank of Japan (BOJ) has purchased more government bonds at $520 billion annually. Meanwhile, the US Federal Reserve has maintained its $85 billion per month target. And this month, the Reserve Bank of Australia, the Bank of Korea, and the European Central Bank (ECB) have all cut down on interest rates. At the same time, leading economies the world over have set their interest rates at historic lows. The members of the ECB have released comments saying that interest rates may still be cut and that they are willing, for as long as it is necessary, to “maintain an expansive approach.” The ECB and the BOJ have made assurances that their easy money policies will still be in place.

US recovery

Data from the US show that there is an increase in the pace of the recovery of the property market in the country. According to the Case-Shiller index the annual price increase has been the strongest in the past seven years. Moreover, data from the Conference Board has revealed that this month, consumer confidence in the United States is at the highest level in five years.

Justification for the rally

Senior Schaeffer’s Investment Research strategist Ryan Detrick said that improvements are now evident in the economy backing the saying that “the stock market tends to lead the economy.” He added that there is some justification for the current rally.

The observed increase in the last 12 months in both the European and US stock markets had occurred despite the persistent unemployment issues. There are many explanations given for the phenomenon, but people are saying that the trend is boosted by less major bad news and more good news.

Photo Credit: Wall Street