The pandemic has no intention to stop yet, there are still difficulties with Brexit, but even this does not particularly interfere with market optimism.
Global stock indexes react rather cautiously to the presence of several serious risks at once, hoping that if even one of them is implemented, central banks will come to the rescue with new monetary incentives.
According to a Reuters consensus estimate, the S&P 500 index will grow by 10% next year. Some of the largest banks, such as JPMorgan, forecast growth of almost twice as much.
Morgan Stanley experts, meanwhile, warn that the stock market is overvalued and is in a vulnerable position.
In turn, Citigroup analysts note that the indicator of fear and greed in the stock market has reached extremely "bullish" values, and this means inevitable losses for buyers.
"The current euphoric values suggest a 100 percent probability that buyers in the stock market will make a loss in the next 12 months," said Citi strategist Tobias Levkovich.
Peter Boockvar, investment Director at Bleakley Advisory Group, agrees with these estimates.
"There are practically no seats left in the bulls 'boat," he stated.
Investors seem to have no doubt that the US Central Bank will continue its policy of monetary stimulation of the national economy.
However, Fed officials have repeatedly pointed out that a significant expansion of quantitative easing could lead to undesirable consequences. According to them, in the current conditions, the most effective and necessary measure is fiscal stimulus.
The emerging progress in negotiations on additional support for the US economy, which have been underway between Democrats and Republicans since August, contributed to the rise of US stock indexes to new highs and a decrease in demand for a safe greenback.
News around the coronavirus vaccine also continues to put pressure on the US currency.
The U.S. Food and Drug Administration may approve a vaccine developed by Pfizer and BioNTech on Thursday after its effectiveness and safety were noted.
The bullish momentum in the EUR/USD pair weakened and it retreated, despite the continued risk appetite. However, the losses were very modest: the pair fell less than a cent from its 2.5-year high.
The single currency remained stable thanks to strong statistics for Europe. According to ZEW surveys, German investors have a negative view of current conditions, but are optimistic about the prospects for the next 6 months.
Ahead of the December ECB meeting, the main currency pair trades near the 1.2100 mark.
It is expected that by the end of the meeting on Thursday, the regulator will refrain from lowering interest rates, increase the volume of the emergency asset purchase program by €500 billion and extend its validity for six months, until December 2021.
The European regulator is also facing the problem of a weakening dollar. This year, the greenback has lost more than 7.5% against the single currency.
The US Treasury and the Fed are quite capable of preventing the fall of the US currency, but they are unlikely to do so in the foreseeable future. The weakening of the dollar against the currencies of developed partner countries helps the United States to devalue public debt, increase the competitiveness of goods and services, and maintain the level of inflation necessary for economic growth.
Europe is unlikely to be ready to calmly look at how export competitiveness is squeezed out by the growing EUR/USD exchange rate. It may be known tomorrow what the ECB thinks about this.
It is obvious that the regulator already has enough reasons to make attempts to stop the growth of the euro through policy easing. However, the European Central Bank has rarely been so decisive as to sharply reverse the growth of the single currency.
Therefore, "bears" should be careful in making plans for a sharp and prolonged decline in EUR/USD after the next ECB meeting.
In the context of the weakening dollar, primarily due to the aggressive stimulus policy of the Fed and expectations of the next package of measures to support the US economy, we are likely to see further growth in the main currency pair.
