FX.co ★ Markets on rise but bears stay alert

Recently, Wall Street updated records so many times that new peaks do not come as a big surprise. On the other hand, taking into account a stable economic growth, it is hardly surprising that stock indices also advance. Moreover, not only developed countries demonstrate positive trends, most emerging markets also show good results.

Investors plan to celebrate the New Year in a happy and confident mood. Market sentiment is supported by the data for the third quarter. For example, the S&P 500 companies managed to increase annual earnings by 8.5 percent a share. Moreover, long-term profit expectations are incredibly high: according to forecasts, profits will grow by 14 percent in a year, both in the US and Europe. Some experts believe that it is beneficial for companies to increase profits when stock prices grow, and to depreciate them when the market is bearish. In the first case, management steadily achieves its targets and receives its stock options. In the second scenario, when the market is moving downwards, managers release all the bad news in order to set the next targets at a lower base level.

So bears do not go into hibernation this winter. When the economy is improving and interest rates are low, it is extremely difficult to predict the next recession.