After a few years of struggle to find an alternative to over-leveraged financial models, the transition to a new era of a deleveraged economy has begun. Recently, the necessity of this transition is confirmed by rising European and Global financial uncertainties. Evidently, these are negative factors that still keep investing risk at higher than normal level. On the other hand, there are positive signs of recovery.
The third quarter US GDP almost doubled to 2.5%. The unemployment rate has improved from 9.1% to 9.0% in September. These two numbers cause some debates concerning how they are calculated and if they are able actually to reflect the reality of economics, however, other numbers also look good. The most important numbers that push the shares prices are corporate earnings. They are relatively healthy. Therefore, the possibility of a double recession now seem less likely than before.
Furthermore, S&P-500 is trading below historical price-earning ratio. Many stocks look cheap and attractive. Since most investors are still scared by the market volatility of the recent years, they keep a lot of cash and potentially able to lift the demand and prices. If the future outlook of the stock market stays strong, further uptrend can be just a matter of time.
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