Stock Market Indices Are Higher Than Economic Fundamentals

Stock Market Indices Are Higher Than Economic Fundamentals

Stock market indices and economic fundamentals have already been separated. When uncertainty decreases, this segregation will become more apparent, which, according to Natixis, will lead to a tax for stock buyers, improper distribution of savings, the appearance of bubbles and the risk of financial crisis. “The level of uncertainty remains higher when asked about public health (will there be a second wave of epidemic?), Geopolitics (will there be a new wave of US protectionism?) And economy (how fast will it recover?). However, there is a clear recovery in stock market indices, and the sharp rise in PER is a clear indicator of indices and fundamentals diverging from each other and rising far more than the trend of future earnings. " “When the uncertainty decreases, we should expect the stock market indices to be significantly higher than fundamental. This situation has both microeconomic and macroeconomic consequences: Due to the tax applied to stock buyers, misplacement of savings, stock prices will no longer provide information about the status of companies and the risk of financial crisis. Due to the appearance of bubbles in the stock, these bubbles have a high risk of bursting, as we saw in 2000-2001. ”-Natixis