Will the Stock Market Crash with Interest Rates Going Up?
Investors jumped into riskier assets last week, pumping $ 27 billion in equity funds as positive news of progress on the COVID-19 vaccine led to booming demand to buy shares in the worst-hit sectors such as banking, tourism and leisure. and the oil industry, Bank of America (BofA) reported on Friday.
Citing data from EPFR (Emerging Portfolio Fund Research), the bank said that inflows into global equities in the past two weeks rose to $ 71.4 billion, which is the largest ever. The leaders of the movement were the shares of the US and emerging markets.
However, investors were not ready to give up high-tech stocks, which received $ 2.4 billion last week. BofA reported that the feedback was as follows: «We do this (rotation for stock valuation), but we do not sell technology».
Value stocks, typically of companies more sensitive to economic cycles, rallied sharply after Pfizer announced positive vaccine trial data this month, raising hopes for a faster economic recovery..
BofA said it expects 2021 to be «the year of the vaccine», which will lead to outperforming undervalued stocks over rising, high-yield (junk) bonds over investment-grade bonds, emerging markets over S&P 500 and small caps over large caps.
The risky action taken last week prompted investors to withdraw $ 4 billion from gold, the largest outflow in history. However "yellow" metal is ready to end 2020 with its best annual performance since 2010.
However, the bank advised clients «sell vaccine news».
«We say that credit and equity prices will peak in the coming months at peak positioning levels, at peak politics, at peak profits, as optimism peaks ahead of vaccine distribution.».
In recent days, major banks have raised their forecasts for the stock market for 2021, expecting double-digit returns on European stock indices in the US and Europe..
«As fiscal and monetary policy is still very flexible, a sharp rise in the company’s earnings will lead to an increase in the return on equity.», – said Jeroen blockland (Jeroen Blokland) Portfolio Manager at Robeco.