Global stock markets: still positive for now

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Personal Investing

17 May 2021

With unprecedented amounts of government relief continuing to create favourable economic conditions, our Asset Allocation team remains positive on global stock markets.

Global stock markets have notched up strong gains from their pandemic lows. Inevitably, this has caused many investors to ask for how much longer can the prices of company shares continue to rise?

While we believe that much of the good news has already been discounted, we remain positive on our overall outlook for global stock markets – albeit with the greater possibility that company share prices will fluctuate more markedly going forward.

Overall, we struggle to see any seriously negative events impacting stock markets in the short-term – barring such incidents as a geopolitical event or the emergence of yet another pandemic.

Of course, it may be that any significant rise in global stock markets becomes harder to achieve from now on but given the fact that we have only just emerged from a recession, we remain positive for now.

Where will all the cash handouts go?
The short-term outlook is one of economies opening and normalising. We believe governments will continue to be very supportive in helping economies in the absence of pressure from rising inflation (otherwise known as a rise in annual prices).

Stock markets are still figuring out what all the extra help during the pandemic means for the world economy. We believe that a significant amount of this cash will be spent on boosting economic growth and possibly inflation. Of equal importance is our expectation that a significant amount of the cash will be invested in global stock markets by personal investors.

All things considered, we don’t believe company share prices are too expensive. Furthermore, we see little long-term value in government bonds (a government bond is effectively an IOU whereby investors lend to a government for a fixed period of time in return for a fixed interest rate). This lack of value in government bonds, in our view, makes us more favourable on the long-term expected returns from company shares.

Remember, the value of any investment is not guaranteed. The value of investments and any income received from can go down as well as up and you may not get back as much as you had originally invested.

Forward-looking statements are, by their nature, subject to significant risks and uncertainties and are based on internal forecasts and assumptions and should not be relied on.