A quicker recap of the CY 2020 performance right across the domestic and global markets, including valuation, earning updates, and more will help you understand equity markets in CY 2021. A detailed report will ensure that you understand more about the current standing of the share market and work on the later investments accordingly.
The globalized equity markets have actually bounced back sharply, given all the interventions by the government spending and central banks. Some of the markets like the USA, India, and more are now trading at levels, which are right above the pre-COVID highs.
- Right now, the valuations have been proficiently supported by an easy form of liquidity and with the hope of vaccine-driven recovery.
- Markets are currently buoyed on some of the higher-earning hopes and recovery, mainly in the small-cap or value segment.
- The main goal here is to focus on the lower interest rates and hoping for a better demand environment.
- In case the economic recovery proves to be robust, and RBI does not move towards a high real interest zone aggressively, then smaller caps are likely to get benefitted the most.
Tune In With The Major Economies:
From what the recent survey has unfolded, it can be stated that major economies have thoroughly escaped the lockdowns and pandemic with little long-term economic damage. It is because of the financial support and substantial funds.
- Job retention schemes and wage subsidies have prevented a large amount of unemployment from rising significantly in most countries.
- In the USA, delinquency rates and corporate bankruptcies on the consumer loans were a bit lower in the September quarter when compared to the same period in 2019.
- The tourism, hospitality, retail, and tourism sectors have been hit hard, but the overall balance sheet and its damage to the households and corporates have been quite imited, even with large lockdowns.
The Notable Damage:
Among the lot, the most notable damage can be seen in the rising government debt. The IMF project that sums up the government debt for the G7 economies rose by 23% of the GDP in 2020. Higher debt made government finances quite vulnerable to the rising interest rates. This is going to be one significant issue, which will continue for the next couple of years. It is likely to matter the most when the spare capacity is exhausted eventually, and the inflation rates start to rise up.
The chances are high that the government will soon come under pressure and will reduce deficits only when the bond yields rise and only when the market starts questioning debt sustainability. Tight monetary policy and fiscal austerity are still some years away!
Learning About The Policies:
Going through the present scenario and then investing in the share market today is always a good strategy on the basis of which you can invest. Learning the present scenario is important, especially in such a volatile situation. Thus, being aware of not just the equity market but its current standing as well is important before coming to a conclusive point.