Ahead of the opening of Wall Street Trading Week, analysts are analyzing Global

Wall Street Trading Week will open against the backdrop of sharp price declines last week, following the rise in bond yields. Analysts are trying to analyze last week’s events, and try to assess how the events will affect the stock market in the long run. Meanwhile, the reporting season is coming to an end. It is expected to publish its results during the week.

History shows that rising yields do not cause prolonged declines in the market
Against the background of the rise in bond yields that led to a shake-up in the stock market Alex Zabrzynski, Chief Economist of Meitav Dash Emphasizes that experience over the past 30 years shows that rising yields have never caused a stock market crash. This is after the last few decades there have been quite a few episodes of rapid and significant rise in US bond yields. In most cases the stock market recorded an increase in the period in which yields rose and only in some cases there was a slight decline. Temporarily, in shares.

“In the current event of rising yields the declines in the stock market are even less justified for the following reasons: First, the rise in yields is occurring, among other things, due to expectations of economic recovery. Second, the Fed has no intention of raising interest rates anytime soon. H and / or take another step to curb the rise in yields. Third, the level of yields should not be a difficulty in terms of debt service capacity for most companies. Fourth, in terms of interest rates, the stock market is not expensive.

Source: Bloomberg, Meitav Lap Brokerage

Most forecasters update their forecasts upwards
Yonatan Katz and economist Lider Capital MarketsIt is estimated that the Fed is expected to update its upward growth forecast and downward unemployment forecast. More accelerated growth is expected to support the early announcement of the gradual reduction in the Fed’s balance sheet, probably as early as the fourth quarter of 2021. “These developments will not support declining yields in the bond market. Apparently the current nervousness in the bond market reflects this. ”

“Recently, most forecasters are updating the growth forecast in the US upwards, as a result of declining morbidity, accelerating immunization and removing restrictions on economic activity. In addition, there is an expectation that most of the proposed aid package ($ 1.9 trillion) will be approved in the coming weeks. An actual $ 1.5 trillion approval is now expected (after compromises), with two-thirds to be implemented in 2021. Therefore, the aid package may contribute about 1.5% – 1.7% to growth (according to Jefferies Investment House’s estimates). ”

“In addition, the economic data at the beginning of the year are relatively strong: 5.1% increase in retail trade, rapid expansion in industrial production, sharp increase in orders for durable goods, rapid growth in investment in residential construction, sharp increase in disposable income and improvement in services. Biden’s plan is expected to accelerate. “Increasing disposable income (and therefore encouraging private consumption) by providing $ 1,400 to most citizens, and additional subsidies. In addition, there is a proposal to raise the minimum wage sharply.”

The reporting season continues
The reporting season on Wall Street is coming to an end, with the following companies expected to publish this week: