# Investment Outlook: A fortnightly look at global financial markets Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-10-23 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Global Market Analysis: Bullish Near-term Sentiment Meta Description: Stay informed with the latest stock market trends and insights from Tom Elliott, deVere Group's International Investment Strategist. Learn why the bull Tags: featured Tag URLs: featured (https://financedigest.com/tag/featured) URL: https://financedigest.com/investment-outlook-a-fortnightly-look-at-global-financial-marketshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd231017-1-1736843358459-compressed.jpg) **Tom Elliott,** deVere Group’s International Investment Strategist Near-term market sentiment: Still bullish. Last week the MSCI World index reached a new all-time high. It is up 15.6% in USD, and 14.3% in [local currency terms](https://www.financedigest.com/xledgers-long-term-local-support-for-bristol-sport-a-successful-partnership.html "Xledger’s long-term local support for Bristol Sport – a successful partnership"). The S&P 500, FTSE 100, and DAX 30 [stock market indices also saw new highs last week](https://www.financedigest.com/u-s-stock-markets-treasury-yields-perk-up-oil-falters-as-choppy-week-winds-down.html "U.S. stock markets, treasury yields perk up, oil falters as choppy week winds down"), while the Nikkei 225 reached a 21 year high. Morgan Stanley reported an improved risk appetite amongst investors, which was has been illustrated by outperformance on Wall Street of growth-biased small cap and cyclical [stocks](https://www.financedigest.com/mutual-funds-vs-stocks-which-is-better.html "stocks") over defensive sectors. There are three key arguments that support further stock [market gains](https://www.financedigest.com/wi-fi-semiconductor-chipset-market-gain-impetus-due-to-the-growing-demand-over-2015-2025.html "Wi-Fi Semiconductor Chipset Market Gain Impetus due to the Growing Demand over 2015-2025"), and continued demand for higher yielding bonds. First, global [GDP growth](https://www.financedigest.com/spain-q2-quarterly-gdp-growth-revised-to-1-5-from-1-1.html "Spain Q2 quarterly GDP growth revised to 1.5% from 1.1%") is strong. Last week the [IMF upgraded its estimate of world GDP growth](https://www.financedigest.com/german-economic-growth-to-remain-muted-in-near-term-imf.html "German economic growth to remain muted in near term – IMF") to 3.6% over 2016. It had been 3.2% at the start of the year. Second, this feeds through into higher corporate profits, which supports [stock market valuations](https://www.financedigest.com/frothy-stock-market-valuations-a-dash-for-cash-and-digital-money-all-on-bank-of-englands-risk-radar.html "Frothy stock market valuations, a dash for cash and digital money – all on Bank of England’s risk radar") and company’s credit ratings. And third [bank account cash rates and bond yields](https://www.financedigest.com/analysis-banks-lag-bond-yield-surge-as-recession-worries-trump-cheap-valuations.html "Analysis-Banks lag bond yield surge as recession worries trump cheap valuations") look set remain low, because low global inflation means that there is little pressure on central banks to raise interest rates by anything more than token amounts. The Fed’s unwinding of its QE program, due to start next month, will be done at a very slow pace in order not to raise [bond yields](https://www.financedigest.com/traders-ramp-up-bets-on-75-basis-point-ecb-sept-hike-bond-yields-jump.html "Traders ramp up bets on 75 basis-point ECB Sept hike, bond yields jump"). It is, though, undeniable that the doom-mongers have some good arguments up their sleeves. Valuations on many risk assets are high by historic standards. (The bull’s response is that the argument misses the point, which is that with interest rates and bond yields low, [investors have few alternatives if they are seeking](https://www.financedigest.com/anti-static-foam-packaging-market-booming-segments-investors-seeking-growth-2030.html "Anti-static Foam Packaging Market Booming Segments; Investors Seeking Growth 2030") income). The U.S economic cycle is long in the tooth, since the current period of growth began in early 2009 and is [currently the second-longest period of expansion in its history](https://www.financedigest.com/ventricular-restoration-systems-market-development-history-current-scenario-industry-insights-2030.html "Ventricular Restoration Systems Market Development History, Current Scenario & Industry Insights 2030"). Unemployment is low at 4.2%, which in the past has led to [rising wage costs](https://www.financedigest.com/fortum-says-rising-costs-of-nordic-power-trading-are-worrying.html "Fortum says rising costs of Nordic power trading are “worrying”"), inflation and higher interest rates. (The bull’s response: this is not a normal cycle. Low unemployment is not feeding through into higher wages, due in part to the large pool of economically inactive people that are not included in unemployment data). Separatism and nationalism are on the march in much of western and [eastern Europe](https://www.financedigest.com/u-s-troops-arrive-in-poland-to-reinforce-eastern-europe-allies.html "U.S. troops arrive in Poland to reinforce Eastern Europe allies"). This represents a threat to free trade, as do the mercantilist trade [policies coming from Washington and Beijing](https://www.financedigest.com/beijing-nervously-returns-to-work-as-china-doubles-down-on-zero-covid-policy.html "Beijing nervously returns to work as China doubles down on ‘zero-COVID’ policy"). (Bull’s response is to agree, but point out that so far Trump has not changed any existing trade arrangements and in Europe, [President Macron](https://www.financedigest.com/french-president-macron-reaffirms-that-pensions-system-reform-is-necessary.html "French President Macron reaffirms that pensions system reform is necessary") leads an attempt across the region to liberalise economies). The IMF warned last week that the global economy is weighed down by too much debt, making its health very sensitive to any [rise in global interest rates or bond yields](https://www.financedigest.com/euro-zone-bond-yields-rise-after-u-s-jobs-data.html "Euro zone bond yields rise after U.S. jobs data"). (Bull’s response: agreement. In the downward swing of an economic cycle, those in debt become crushed by their obligations and become [forced sellers](https://www.financedigest.com/lg-says-not-a-forced-seller-of-uk-government-bonds.html "L&G says not a forced seller of UK government bonds") of assets). Can this bull [market persist](https://www.financedigest.com/strict-regulations-regarding-hygiene-at-industrial-workplaces-to-create-high-demand-for-industrial-dispensers-persistence-market-research.html "Strict Regulations Regarding Hygiene at Industrial Workplaces to Create High Demand for Industrial Dispensers: Persistence Market Research")? Sooner or later this bull [market will end](https://www.financedigest.com/industrial-magnetrons-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "Industrial Magnetrons Market Competitive Growth Strategies Based on Type, Applications, End User and Region"). We may be in the last phase, which the investor John Templeton describes as ‘euphoria’, after which comes the deluge. But with no clear trigger in sight to cause a sell-off, it is premature to take risk off the table. Investors should try to be as diversified as possible, perhaps using the 60/40 model as their guide. Multi-asset funds based on this principle are available, often with different ratios of [bonds and equities depending on the level of risk](https://www.financedigest.com/euro-zone-bond-yields-fall-as-ecb-policymaker-flags-recession-risk-gilts-eyed.html "Euro zone bond yields fall as ECB policymaker flags recession risk, gilts eyed") suitable for an investor. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---