Although the correction is still visible on the cryptocurrency market, something else is happening on Wall Street. The last Friday session on the New York Stock Exchange brought new records for the three main indexes. The media is already talking about "classic melt-up". Investor moods are extremely good.
On Friday, we already had the seventh session in a row where Wall Street indices set new historical highs. After a 0.49% jump, the S & P500 is at 3,221.22 points. Dow Jones rose 0.28% and ended the week at 28.450.09 points. Nasdaq Composite scored a 0.42% increase to 8924,96 points.
Is Wall Street celebrating an agreement with China?
Where does the bull market come from? The group of analysts is dominated by the narrative that this almost 12% increase in S & P500 in the fourth quarter is the market reaction of the "first phase" of the US trade agreement with China. Is this not an exaggeration? We are talking about an agreement that so far does not end the currency and trade war between the two largest economies in the world.
But there are also really good macroeconomic data. In November alone, American spending increased by 0.4% mdm. This phenomenon was accompanied by a very strong increase in income of American households (by 0.5% mdm against the expected 0.3%). In addition, the core consumer spending deflator (PCE core) - in other words: the price inflation measure preferred by the Fed - is only 1.6% yoy. It is therefore still below the Federal Reserve's 2% inflation target.
The stock market sentiment index prepared by CNN Business now indicates "extreme greed". It shows the highest readings since autumn 2017. Then there was the previous "melt-up" on the US stock market, which ended in an obvious way for such situations - a very sharp correction in February 2018. It is almost certain that it will not be different now.
However, some uncertainty awaits the Americans in 2020. The election campaign will last for most of the year. It is not at all obvious that Donald Trump will be re-elected president. Changing the White House tenant may mean corrections in economic and foreign policy, which will affect Wall Street.
