Business and financial analysis research

US Stock Market Bubble?


The trend of U.S. stocks is not only vital to the U.S. economy, but how much risk it will bring to the global market and even the global economy has also become one of the focus topics for investors’ attentions.

The US Federal Reserve’s quantitative easing stimulus and financial assistance continue to increase.  Although the economy has not yet passed the storm, stimulus measures, vaccination efforts and strong economic data have boosted investors’ optimism about restarting the economy.  The 10-year U.S. Treasury yield rose in response to high inflation expectations.  The U.S. economy is fully open. It is estimated that economic growth will reach a strong growth rate of 6.5%.  The U.S. economy is expected to recover faster than China this year. And economic growth expectations are a key factor in determining stock market returns.  After the epidemic hit the global economy last year, crude oil also made a big turn from the valley, reaching a price of close to US$68 per barrel.

Developed countries, including the Federal Reserve, have implemented loose monetary policies since last year.  The current valuations of global asset prices are at historical highs.  A huge amount of hot money has flowed into global capital markets, including stock markets.  From the current price point of view, the global stock market may be at a stage of overvaluation.  As countries begin to use the vaccine, the epidemic is expected to be greatly alleviated in 2021, and the US economy is also expected to recover in 2021.  The Fed reiterated that it will not use interest rate hikes to curb inflation.  If the US earnings performance and economic data continue to improve, it may bring more upward mobility to US stocks.

There are still many uncertain factors in the market.  India, Brazil and other countries, the epidemic has reignited, and the tourism industry may be hit.  The negative news may put pressure on oil, and the local extension of the lack down may affect economic growth and the demand for fuel may decline.  The decision of the Organization of Petroleum Exporting Countries and OPEC+ will affect the price of oil. As oil production decreases, oil prices will rise; on the contrary, if the supply increases, oil prices may fall.  In addition, policies such as the energy transition and net-zero pledges may also affect oil demand.

Will the U.S. stock market crash and bubble?  Will oil continue to rise?

Stocks and oil are complementary to each other, their rise and fall factors are all connected, the economic take-off is related to both the stock market and oil.  Therefore, as an investor, we need to carefully analyze what kind of situation is going to happen.   We have become more cautious about current US stock market conditions.

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