Stocks are flying high, so high that one could ask why they dropped so suddenly and so quickly in August 2015 when concerns were growing over China’s economic slowdown and the Fed’s hesitation on its rate policy. The main question that must be answered before having any hope of a year-end rally is what’s really driving the financial markets?
Indeed, the earnings season has finally been positive so far yet the figures showed the bullish trend in economic growth and sales might have lost some steam, hence increased caution on behalf of analysts when providing with medium term perspectives for 2016.
As the currency war is still raging, the PBOC just cut its rate by 25 basis points anew, and rumors are spreading about further QE by the ECB, investors should rightfully wonder whether the current level of financial markets is based on real strong growth or on accommodative and generalized monetary policies by central banks. In the meantime, the Chinese threat on world’s economy remains and the Fed has yet to clarify its intentions.