Bank of America recently said that the market is overly dependent on the U.S. Federal Reserve, expecting the U.S. government’s monetary easing to continue to ease and push up the market, highlighting the risk of stock market vulnerability is at an all-time high.
Foreign news quoted Bank of America global research report shows that last year the S&P 500 index from the epidemic low soared nearly 90%, it is the second fastest rise in U.S. stocks so far. After the sell-off triggered by the outbreak of New Crown Pneumonia (CCP virus) in March last year, the rapid economic downturn prompted the Federal Reserve to launch a mega-monetary stimulus, which inspired the stock market to stabilize and has so far led to a major rally, but also made the market more vulnerable.
With the widespread vaccination, the U.S. economy has seen a strong recovery, making the market begin to worry about inflationary heating fears, driving the Fed to gradually reduce bond purchases or even raise interest rates. If the Federal Reserve tightens monetary policy, valuations of high-growth stocks will bear the brunt. Last Friday’s release of weak non-farm payrolls data, more evidence of the market’s reliance on the Federal Reserve, the edge of this bad news, the market identified as good news, but also to motivate the Nasdaq higher, because so the Federal Reserve will continue to maintain dovish.
Bank of America pointed out that the Federal Reserve Board is committed to helping the job market recovery, although the Board should not show hesitation, but their arbitrary view of inflation, there is no guarantee that it will not create problems.
The bank said that since 1928 there have been four sharp “vulnerability shock”, of which the past three and a half years, the S&P 500 has occurred two times. This summer, the stock market is likely to enter the blonde girl walking steel, that is, must be in the inflation rise, uncertainty can appear group immunity downside risk, these two will become the catalyst of the stock market vulnerability shock, vulnerability risk will occur in the valuation, parts seem to limit, trading liquidity will continue to reduce.
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