According to some analysts, the current low value of share indexes is only temporary
Especially on the U.S. stock market. When the pandemic is over, the largest rally ever may happen.
There’s some reasons for that, may it be unattractive investment assets or strong impulse sent to markets by the Fed. Firstly, we need to realize that shares and bonds are competitive assets. If the Fed keeps interest rates low, expected bond yields could be lower than yield of shares.
History teaches us that when the Fed enlarges its balance sheet, that is increases the volume of money sent to markets, a big part of money goes to stock market, where it supports demand resulting is share price growth. The Fed’s balance sheet is predicted to be from $6 trillion to $8 trillion. According to analysts, the bearish mood should leave markets once the pandemic is over, and that will result in increasing shopping spree.
Moreover, household consumption expenditures make about 70% of the U.S. economy. When the government releases restrictions, people begin to spend more money and profitability of companies will grow, including increase of their shares. Furthermore, the elderly should play a key role, when they invest more savings to shares, where yields are expected to be higher than e.g. with government bonds.
