WHY THE RALLY MAY KEEP RALLYING
Equity markets took a bit of a hit when the Iran war first broke out – but that seems like an increasingly long time ago, with various indices having hit record highs since then.
And while the sheer size of the rally is encouraging some profit taking, “equities are not about to reverse course,” Arun Sai, Senior Multi Asset Strategist at Pictet Asset Management, said in a note.
There are several key arguments for the rise in equity markets to continue, he noted.
“To begin with, the risk of stagflation that has haunted markets since the war began is receding,” he said.
As the U.S. and Iran are progressing towards a peace deal and oil prices have come down, expectations for growth are likely to pick up and those for inflation are expected to ease – which would be positive for stocks, Sai explained.
“History also suggests equities have further to run. Interest rates have begun to rise worldwide, but experience shows this is usually positive for stocks, particularly if monetary tightening is a reaction to improving growth,” he added.