The reasons why Bullish stock market should proceed during first half of this year.

Short Comment 

I think the rally in the global stock markets will be proceeding for a while, with huge volatility. S&P500 and NASDAQ are strongly rising targetting 2,600 and 7000 respectively and HangSeng is following them targetting 27,000. Messages from US Federal Reserve  and negotiation for trade-war between US and China are supporting the movements.

Major players in Wall Street are suggesting optimism about the direction of the markets for this year. I agree with them, at least during first half of this year. There are the reasons.

First, global macroeconomic situation is not that bad. Even though slowdown of global macroeconomic situation including US, China or Germany, the indices are not that bad. Unemployment in US is the best. Chinese economic growth is still higher than 6%. Europe and countries in EM are dissappointing the participants, but they are not worse than expected.

Second, central banks are supporting the rally. Fed is changing their stance dramatically from Hawk to Dove. PBC indicated that they could start their easing policy in near future. Considering debts of Chinese conglomerates, there is not another choice for PBC. Research analysts suggest that ECB could re-start buying European bonds considering slowdown of the  regional indices. The institutions, in other small countries like South Korea, are also suggesting that they will be in dovish stance during this year. I do not think their stance could change the direction of economic situation. However, for financial markets, their messages will be one of the most important factors.

Third, yield spread between 2y and 10y US T-Notes has enough time to touch minus level. The number is between 15bp and 17bp, so it needs another six months to touch minus level. Even if it touches minus level, the plunge of the stock market needs another six to twelve months to come up. Big-shots like Ben Bernenke, Jamie Dimon or Janet Yellen are insisting that the decreasing yield spread is not a signal for slowdown of the economy like they did every decrease in the past. I think we should worry about the decreasing spread, considering slowing other indices, but it is too early to bring the plunge.

The three factors should be key factors for the market during first half of this year.