Wall Street begins November with optimism, after an October marked by a relief rebound of 7%. The three major US stock indexes (Dow Jones, S&P 500 and Nasdaq) are at record or near record levels. The Dow crossed Monday in session an all-time high, exceeding 36,000 points. Four factors are supporting the euphoria in equity markets. The first, manifested for a month, is the conviction that the pandemic will be overcome by the continuation of vaccinations and reminders which de facto become mandatory. Investors see most countries around the world overcome this health crisis next year, which should revive global growth. The second factor is the feeling that the Fed has finally realized the growing inflationary risk,due to the generalization of wage increases, and will not be overwhelmed.
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After having delayed reducing his $ 120 billion in public bond asset repurchases, Jay Powell is expected to explain Wednesday that a gradual withdrawal of these emergency monetary measures taken in March 2020 will delay the Fed's key rate hike. The latter is supposed to remain at zero for several more quarters. The third factor is the perception that Republicans and a handful of centrist Democrats in Congress are going to stop the Biden administration from pushing the left too hard. Last euphoric factor: the good performance of all listed companies in the third quarter. Demand is strong and promising increases in profits. Provided, however, that obstacles to growth, such as shortages of materials, components and labor,dissipate and stop feeding inflation. Otherwise, the optimistic bet of the Fed, which Wall Street wants to believe, will be lost.
