US Stock Market Continues Soaring Embracing Liquidity... "Still Room to Rise"

Concerns Over Bubble Collapse Grow..."Anxious but No Reason to Stop the Rise"

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The massive liquidity supply that began with the novel coronavirus infection (COVID-19) has driven the U.S. stock market higher this year, and market experts predict that the U.S. stock market will continue its soaring trend next year. Although the market bubble appears to be growing as much as during the late 1990s 'dot-com bubble,' experts explain that there is no compelling reason to believe the stock market will fall immediately.

According to CNBC and others on the 26th (local time), experts forecast that while the pace may slow somewhat compared to this year, the U.S. stock market will maintain its upward trend next year. CNBC predicted, "This year, the stock market is expected to close with double-digit gains, but in 2021, it will not rise as quickly as it did nine months ago when the bull market began."

Some have expressed concerns, pointing out that the U.S. stock market is full of bubbles at levels comparable to the year 2000 when the dot-com bubble burst began. The New York Times (NYT) noted that the S&P 500 index rose 15% this year, approaching the level of 2000 based on some measurement methods when the dot-com bubble collapse started.

Especially toward the end of the year, initial public offerings (IPOs) were actively conducted in the U.S. stock market, showing signs of overheating. DoorDash, a food delivery service that debuted on the New York Stock Exchange earlier this month, saw its stock price soar 86% on the first day of listing, and Airbnb, a lodging sharing company, surged 113% on its first trading day. As a result, 447 companies went public this year, raising a total of $165 billion (approximately 182 trillion won). This is the largest amount in 21 years since 1999, when 547 companies raised $167 billion through IPOs.

Charlie McElligott, a market analyst at Nomura Securities' New York branch, told the NYT, "The market is definitely frothing at the mouth right now," and Ben Inker, head of asset allocation at Boston-based asset management firm GMO, said, "We haven't seen this kind of frenzy in the U.S. since the internet bubble," adding, "It reminds me of what happened in the past."

Nevertheless, experts believe the possibility of the stock market turning downward immediately is low. The U.S. Federal Reserve (Fed) continues its accommodative monetary policy by maintaining 'zero interest rates' for the coming years and purchasing large amounts of bonds, supplying massive liquidity to the market. Additionally, COVID-19 vaccines have been developed and distribution has begun, and the U.S. Congress passed a stimulus package after months of conflict.

With these funds flowing into the stock market and no sudden changes expected in monetary and fiscal policies, experts foresee the stock market's upward trend continuing for the time being. According to a survey of major Wall Street banks conducted by CNBC regarding next year's outlook, the average forecast for the S&P 500 index at the end of next year is 4056. This suggests the S&P 500, which was 3703.06 on the 24th, is expected to rise further. Jeb Bris of Spears Abacus, a New York-based investment firm, said, "All of this makes me uneasy, but I can't find a reason for the bull market to stop," adding, "It doesn't seem like the peak yet."

As the new year approaches, market attention is focused on the U.S. Georgia Senate runoff election scheduled for January 5 next year. The outcome will determine who controls the U.S. Senate majority, which could also affect the political standing of the incoming Joe Biden administration inaugurated on January 20. Sam Stovall, chief investment strategist at CFRA, also stated that he would wait until the runoff election to see how the market will move next year.

This content was produced with the assistance of AI translation services.