Stock Markets Following US with All-Time High

Again markets are at all time high and everybody is celebrating how smart they were for buying at the low in March and so on...A short summary of the markets and why they keep on rising all the time. Below is displayed Dow Jones Industrial Average, NASDAQ Composite and S&P 500 index development since 1992. As we can see they have risen signifikantly since 2009.

Rest of the Worlds stock markets are following the U.S. with all-time highs or highs for a really long time. The development is supported by vaccine news and belief of recovery from Corona virus as well as Government stimulus packages in U.S.A. as well as Free Trade Agreement between Britain and EU. At the moment Shiller P/E ratio is at 34 which is a lot higher than the media of 15.81 and mean of 16.77, can we say that markets are overvalued? Not directly as the high PE-ratio is supported by Quantitative Easing which in turns mean really low to negative interest rates.

 Nikkei index (Japanese stock index) reached its all-time high of 27 568 points after the index gained 2,6%. This is the highest value for the index in 30 years.

In India NSE Nifty 50 was at 13 953 point, +0,6%, reaching its all-time high. Back in 1999 the index was at 891 points.

In Hong Kong the Hang Seng index increased by 1% driven by Alibaba which has this fall been under investigation and was fined 500 thousand yuan ($76,463) for not properly declaring past acquisitions. 

Yesterday DAX index (30 largest German companies traded on Frankfurt stock exchange) reached 13 790 points, the highest recorded level since 1988. In September 2021, DAX is expected to expand to 40 companies (link to de40 news). As you can see from the graph DAX Performance Index reached new highs and apparently it is expected to rise even further. We also see that FTSE100 has followed closely the same pattern yet has not fully recovered from the March COVID-19 set back and worries around BREXIT impact on economies. Overall the European markets seem to expect good growth just as in USA yet question will be what happens if there is enough inflation and interest rates start to rise.

 

Following the stock and bond markets closely is also another topic, Bitcoin which also reached all-time high last week of $27,000, back in 2017 it reached $20,000. All indexes, values of all assets are rising at a mind blowing speed, but the economy is lagging far behind. 

Question is therefore why indexes are so high, why assets value has increased so much since 2009? 

Easy answer is quantitative easing practiced by Central Banks that is pushing liquidity to other asset classes then bonds and money markets where you don't get any interest on invested capital. This has also supported home buyers in many countries and investors of most assets' classes. Would argue that this practice of easing should not continue all to long as it removes risks from investors and transfers it directly to taxpayers and Central Banks (bailouts, quantitative easing and other supporting programs). What I do find successful is the way U.S. has handled Corona caused economic issues, by increasing the social security payments. This is a practice most European countries do not have as our social system is different and more supported by Unions which pay additional support to unemployed or partially laid off people. The European system in many countries also has a major issue of it being more beneficial to stay unemployed then to take a job paying them less then they had before or to move to another city where there would be suitable work for them.

Based on how markets are moving and current high values with long payback periods I will personally not invest in index funds. I might look at East Europe and Russia as markets are a bit lower valued there. I will invest and have invested in a few individual stocks that are more reasonable priced, more to come in January when I publish changes made to portfolio.

 

The charts are based on weekly data from yahoo finance so the highest point might not show up in displayed graphs, however I assume everyone gets the point I am presenting. Markets have risen to highs I do not fully understand nor am I able to find fundamental justification, other than what we read in media about expectations and hope or faith. 

First Portfolio Update, Changes and Dividends

 I will on a monthly basis update one of my portfolios for you to see how I am investing and what my views are on different companies and the market in general. This is the first update, hope you enjoy and comment.

Portfolio Changes 

Link to portfolio where you can follow the market value in USD and Euro as well as portfolio development.

 Increase my position in Telia Company by 2 shares at a price of 3,39€ per share before transaction costs of 0,01% for total purchase price. It did not impact the overall purchase price per share as 2 additional shares to 1 195 is a really small change. 

Received aome dividends from Telia. Will most likely use all of the dividends for reinvestments, have not yet decided in what company to invest and how much. Considering Telia Company, however also looking for other options available at reasonable prices. 

Got Basf AS and Bayer AG market prices to update in Google sheets using Google Finance formula by determining the stock exchange where they are traded. That is why you will see a "FRA:" before their ticker symbols, FRA stands for Frankfurt (Germany) which is the stock exchange they are traded. 

Dividends

In total my portfolio received 79,67€ net of tax in dividends, most of it from Telia Company which distributed an additional dividend. 

There was no withholding tax on iShares dividend as it is paid out from Ireland, this will however be taxed based on total dividend income and if I decided to sell any holding at a gain or loss (loss will reduce the amount I owe Tax Authorities).