I’ve just been asked why the stock market has been rallying in recent weeks despite the concerns over Europe, etc.
Two reasons, in my view.
The first is liquidity. The Fed is purposely flooding money into the banking system trying to push investors out of interest-bearing instruments and into riskier assets. On that score they have been fabulously successful…
The second factor is that equities are under-owned as an asset class compared to historical norms. Until very recently, bonds were over-owned to an extent never before seen. The bond bubble looks to have burst and investors have moved money back into equities.
I don’t see either of these factors changing dramatically in the next few months…
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