Stock market this week

Latest update: 18-04-2021 19:59

Earnings season and ECB

Stock markets did very well last week. But given all the good news from the US, the rise could have been a bit more powerful. The momentum is starting to slow down a bit. The fact that many stock exchanges are at or near all-time highs can of course cause a fear of heights.

The fact that the earnings season for mainstream companies has yet to begin this week may also have caused investors to remain a bit cautious.

What I continue to follow closely is the flow of money. Because no matter how hopeful investors were at the beginning of this year about vaccines, the impending end of lockdowns and the recovery of the economy.

It was this gigantic flow of money towards the stock markets that made stock markets rise so fast. If that money flow stops, the party is over.

The earnings season

This week, more and more companies will come up with figures. It is difficult to compare it with last year when many countries were in severe lockdowns. It is therefore better to look at price-earnings ratios.

Because then you know whether the current stock price is still in proportion to the profit. Given the high stock markets and many countries still in lockdown in the first quarter, it would not surprise me if we also see all-time highs at those price-earnings ratios.

That could be justified if companies indicate that they expect significant profit increases later this year when lockdowns are over. However, coming up with a poor outlook will be penalized if the price-earnings ratio is high.

The ECB

We get the ECB on Thursday. I don't expect any major changes. Maybe here and there tune up the policy a bit. What will be important will be how the ECB views the economy now and in the coming months.

Vaccination in the EU is not going well. As a result, EU countries remain in lockdowns for longer. I wonder what the ECB thinks about this economic damage.

The gold and silver price

Last week, the big picture finally became clear to more and more investors. Inflation is on the rise and central banks are not yet considering raising interest rates.

As long as inflation is higher than the interest rate or the yield on a ten-year government bond, that is positive for gold and silver. The wider that gap between inflation and interest (and it is rapidly widening now) the higher that gold and silver can rise.

We entered a new phase in the bull market with gold and silver last week. Last August, the first strong ascent phase came to a halt. Then a period of cooling.

We are now going to get the most powerful part of the rise. That will be a movement of several years. We are now in the beginning of that. The bottom has been set and the rise has begun.

Initially, this increase will continue in fits and starts. A bit of 2 steps up and then a step back. Gold will go to $ 1900 first and then to $ 2100. That can take many months to complete.

Once above $ 2100 and the rise will become more powerful and the downturns smaller and smaller. Confidence will slowly but surely return to mining stocks as well as to seekers' stocks. Gold above $ 1800 and silver above $ 27 is needed.

The expectation for the stock markets

It remains to be seen how the earnings season will go this week. Expectations seem too high to me. That increases the chance of disappointment. Investors, however, are still fairly positive. Then even lesser figures can still count on good reception.

Regardless of how the earnings season goes, I expect a significant stock market correction within a few weeks. The enormous flow of money towards the stock markets is starting to falter. Lockdowns will increasingly be phased out or disappear completely (US).

Then the large flow of money will no longer go to the stock markets but to consumption. That will cause a stock market correction. Difficult to indicate when exactly that will happen. But I expect within 4 weeks.

What will be the most bothered? Stock markets, stocks and basically everything that has risen sharply from November 1 last year. Because those big increases indicate that that's where that powerful flow of money went. If that money flow starts to reverse, the strongest declines will therefore also occur there.

For everything that did not do well or badly in that period from 1 November (including gold, silver and mining shares) you do not have to worry because the money did not go there.

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The stock market forecast for the AEX

The first business figures can be well received this week. It could bring the AEX to the 730. I still have the expectation that the all time high top for the AEX will be at or just below 730.

I also expect a stock market correction within 4 weeks for the AEX. In the Netherlands, the winding down of the lockdown may not yet proceed quickly enough to see that money flow immediately turn towards consumption. But in the US it will. The AEX will then, as always, follow those American stock exchanges.