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09.06.2020 05:08 PM
Stock market correction lies around the corner, signals stop in growth

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The global stock market is affected by what is happening in the economy. Large-scale money injections, which are promoted by regulators in countries, make markets grow. The rise is so rapid that it has already managed to level all the losses that have occurred against the backdrop of the COVID-19 pandemic at the beginning of this spring. According to analysts, the market showed a record drop of $ 21 trillion. However, this fall was also managed to get rid of.

Nevertheless, experienced market participants have long hinted that there should be a significant turnaround on stock exchanges, followed by rapid growth, not limited by almost no external factors. The forecasts came true, but the question was how long this increase will continue because the bullish mood still persists.

In the meantime, the world's major stock indices managed to accomplish a grandiose act, which few believed in. All of which recovered to the level that was last recorded in February this year. Thus, the increase in the cost of securities averaged about 42%, which, without a doubt, is a very outstanding result. The last time such a significant increase was noted was in the crisis year of 2009 at the ACWI MSCI index.

However, experts suggest that very soon the market will feel the strongest volatility, which will force them downwards. But interest in risky assets is unlikely to disappear so soon.

In the meantime, the bulls have taken the lead in the market, for which there are several good reasons. Firstly, the stock indices of the United States of America have already strengthened quite well and crossed the line after which their rapid recovery began after a global fall in March. Secondly, the maximum rise is observed on the stock exchanges of the Asia-Pacific region for the past week. And thirdly, the securities of Europe, most likely, will be able to achieve the highest profit per month, which has not happened for more than ten years.

Of course, this is not the only support that the stock markets feel. So, the stimulus policy promoted by the majority of central banks of the states becomes a positive moment. The gradual removal of quarantine measures is not taking place at a very accelerated pace, but systematically. And the cherry on the cake should be considered a decrease in the number of applications submitted to the employment service of the United States of America, which neither the markets nor experts were prepared for, who assumed significant growth in preliminary forecasts. All this, taken together, cannot but cheer up the stock markets, which is happening today.

However, such a large number of positives cannot but alert the already rather dubious experts. Many believe that a situation similar to blowing a soap bubble is happening. Everyone knows what happens when the pressure gets too high. Some analysts warn about this explosion. The danger of correction is becoming stronger every day, especially against the backdrop of how investors act out news about higher rates of global economic recovery.

A disproportionately high jump in the value of securities in the last month of spring indicates that growth in the stock markets is largely due to speculative actions, while company earnings forecasts remain in the negative zone so far.

Thus, it becomes clear that the markets have gained too fast, which makes them too vulnerable. The slightest negative pressure from the outside can burst this huge bubble with great consequences for the participants. In the near future, you need to be ready for thorough corrections.

Maria Shablon,
Experto analítico de InstaForex
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