Last week, the leading US indices, S&P 500 and Dow Jones Industrial Average, closed with substantial gains demonstrating the largest period of weekly rallies since the end of 2014. However, investors doubt that the rally will last for a long time.
The analysts believe that the rally in the market is based on the assumption that the central banks will bolster the markets in case of deteriorating statistical data. Meanwhile, the funds cut the number of positions in the US shares and increase the monetary reserves.
According to Birinyi Associates, the S&P 500 now trades at 23 times its companies’ net profits for the past 12 months that is above the average of 15.5. Meanwhile, the earnings of the index components slid by 0.6%, while the revenue dropped by 3.3%.
The analysts at Goldman Sachs expect that S&P 500 will lose about 4% from the current level by the end of the year. Therefore, the value of the indicator will fall by around 2.9% in 2015.
The experts say that the forecasts are based on the prospect of the Federal Reserve benchmark interest rate hike which will make borrowing money more expensive and will hold the stock market gains.
Nevertheless, not everyone anticipates weak performance of the US stock market. Some expect strong gains of stocks in the last quarter of the year, while others forecast a global economic recovery next year, saying that it will boost the market growth.
However, there is a reason for optimism as the world’s central banks are still determined to keep the interest rates low which have a positive impact on the stock markets.
