Markets fall but “stocks still well-supported”

Markets fell on Friday.

The S&P 500 fell 0.8 percent, the STOXX Europe 600 fell 1.1 percent and the Nikkei 225 fell 1.1 percent.

Analysts remain optimistic despite the two-day fall in stock markets.

“Stocks are still well-supported by a combination of Fed liquidity, attractive equity risk premiums, and an ongoing recovery as economies reopen from the lockdowns,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note.

A report on Friday showed that the US economy gained 1.4 million jobs in August, a pace that JJ Kinahan, chief market strategist for TD Ameritrade, described as “slow but steady which is actually a perfect thing to see overall”.

Still, Barry Bannister, head of institutional equity strategy at Stifel, warned in a note that with the cyclically adjusted price-to-earnings ratio of the stock market at or near levels last seen in the final two years of the 1920s and 1990s rallies, “the building (and inevitable bursting) of a bubble could make the market a ‘greater fool game’ challenge in the near-term and a modest return vehicle longer term, dashing the optimism of investors”.