A pullback in the Dow Jones Industrial Average and the S&P 500 Index on Tuesday halted the longest winning streak for stocks in months, but there remains a big concern for investors: is a major correction looming? Even some bullish investors have called for a reduction in stocks as something of a catharsis for the next higher leg and a relaxation of some of the frantic retail-inspired bets that have repeatedly sent stocks to new highs amid the rally. recovery from COVID-19.
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“Although there are sparkling segments of the market that are separated from fundamentals, we do not see bubble conditions more broadly,” Lerner wrote in a research report dated Tuesday. “Instead, we see a stock market that is trading at a premium to historical valuations, partly justified by low rates, a shift in the composition of the sector towards higher value growth sectors, a supportive fiscal and monetary policy. , as well as cheaper access to markets (ie a secular decline in fund fees and commissions), ”added Truist analysts, noting that a lower barrier to entry for individual investors was also supporting the stock values. Meanwhile, Daniel Pinto, co-chairman of JPMorgan Chase & Co., told CNBC in a question and answer session that he expects the stock market to rise. “I think the market will move gradually during the year,” he told the news network. “I don’t see a correction in the short term, unless the situation changes dramatically,” he said, describing possible recessions as mini-corrections that will not necessarily change the overall uptrend. What could change things? Naeem Aslam, AvaTrade’s chief market analyst, said in a report Tuesday that optimism in the US market is driven by three players: support from monetary and fiscal policy, progress on COVID vaccines and strong quarterly results. “Basically it looks like the stars are lining up, and the odds are strong in favor of another bull rally,” Aslam wrote. “In other words, we need a major change in the current catalyst to change the market narrative among traders that can trigger a minor pullback, much less a serious correction,” he added. MarketWatch’s William Watts writes that some experts point to the 2009 stock market as the closest parallel to the current configuration of stocks. Citing Tony Dwyer, Canaccord Genuity’s chief market strategist, Watts noted that 2021 could unfold more like the post-crisis scenario seen in 2010, which would point the way to a “solid year” for the market, but with a full journey. bumpy thanks to “multiple first half fixes”. Some of the bumps could emanate from the bond market, with the 10-year TMUBMUSD10Y 1.165% and the 30-year TMUBMUSD30Y Treasurys 1.955% testing recent performance highs and putting some pressure on equities. So-called reflation trading, where yields rise and investors gravitate toward investments that could thrive in better economic times, has provided a number of false dawns for investors so far.