Monday 14 December 2020

Stocks fall amid “excessively high” optimism

The S&P 500 fell 1 percent last week, its first weekly decline in three weeks.

Canaccord Genuity’s chief market strategist Tony Dwyer told CNBC last week that stock market optimism “is excessively high” and that the market is ripe for a sharp pullback in the near term.

However, Dwyer himself is optimistic for the longer term. “With the combination of excess liquidity and a synchronized global recovery, I think it’s set up for a pretty good year,” he said.

Similarly, Federated Hermes chief equity market strategist Phil Orlando told CNBC that there “could be some more chop over the next week or so” but that “we’re going to get through some of these hurdles near term and get to that 3,800 level by the end of the year”.

In Europe, the STOXX Europe 600 also fell 1 percent last week, ending a five-week winning streak.

European stocks were weighed down by a stalemate in talks between the European Union and the UK that raised chances of the latter leaving the bloc without a trade deal.

European Commission President Ursula von der Leyen said on Sunday that the talks will be extended beyond Sunday’s deadline.

Another major concern is the COVID-19 pandemic. Even while vaccines are being rolled out, lockdowns being imposed in the meantime throughout Europe threaten to derail the economic recovery.

On Sunday, Germany Chancellor Angela Merkel said that the country will close most stores from Wednesday until at least 10 January.

“The situation is out of control,” said Bavaria’s prime minister Markus Soeder.

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