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Could this signal the end to history's longest stock rally?

As stock markets breathlessly claim record after record and some global indexes head for their biggest monthly rise in a year, a note of warning seeps out. Could this be the death knell, the final gasp, of the longest stock rally in history?

As Rabobank analysts caution: "The speed of market’s recovery from the sell-off caused by the outbreak of the coronavirus implies that we could be in the last stage of already the longest stock rally in the history of financial markets."

Europe's Stoxx 600, at an all-time high, picked up 0.4 per cent in Wednesday trading, collecting its seventh rise in eight sessions. The composite of Europe's biggest companies is on track for its biggest percentage monthly rise since January last year.

The CSI 300 barometer of stocks traded in Shanghai and Shenzhen, still five per cent off its January highs, has nonetheless recovered sharply this month, as has Hong Kong's Hang Seng index. The S&P 500 rose to a record for a second day on Tuesday and, according to its futures, is poised to add another 0.3 per cent when Wall Street opens.

This is the phase, says Piotr Matys, senior emerging markets foreign exchange strategist at the Dutch bank, when "negative news tends to be very quickly discounted”.

Hardly any bears remain, he says. "And those very few are often regarded as 'sore losers' who missed a great opportunity to make a fortune by going long. The fear of missing out is strong as reflected in very short-lived corrections followed by strong rebounds that produce new record highs."

He claims that, while it is tricky to time the next global financial crisis correctly, one is "long overdue".

"It has been postponed by a strong commitment from major central banks to keep bailing out the markets whenever there is even a relatively small correction.

That said, interest rates have barely increased since the last crisis, leaving central banks with far less room for manoeuvre at the time when even central bankers are increasingly concerned about the side effects of unconventional monetary policy tools.

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2020-02-12 09:20:00Z
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