The market has lost one of its pillars of support

In the wake of the global financial crisis the market was supported by two pillars: high profits and low yields. Both pillars have contributed to the rally from the post-crisis S&P 500 low of 666 to around 2,150 today. However, lately there has been a turn in the markets, and not for the better. For six years, one of history’s great market advances had the fundamental support of an efficient and growing private economy along with the tailwind of low interest rates in the bond market, the principal alternative to stocks. But now we are left with but one pillar of support, built on a shaky foundation of central bank liquidity. Euphoria is not yet driving the market, thankfully, but that may not be far off. The present eight-year-old cycle is already the third longest in history, while the longest cycle in the last century was ten years. (Source: MFS Investment Management) (VIEW LINK)

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