Three factors continue to push equity markets gradually higher – BMO

FXStreet reports that economists at the Bank of Montreal said that three factors continue to push equity markets gradually higher.

Asset inflation

“Goods price inflation remains a key factor; wage inflation is a potential concern, but asset-price inflation is still very much alive too. While the focus on this front tends to zero in on areas like housing, commercial real estate and cryptocurrency/meme stocks, it is very much supporting the broader equity market”.

Longer interest rate view

“While Fed tapering is the next major policy move on the radar, it appears the market is still comfortable assuming a low-for-long interest rate environment post-COVID. For equities, this has helped ease valuation concerns that were percolating earlier in the year.”

Lots of earnings support

“Earnings growth topped 95% YoY and, beyond base effects, the level of earnings on the S&P 500 has surged more than 20% above pre-COVID levels. Combined with the decline in longer-term interest rates, this has helped justify the move in prices. And, it reinforces that big businesses that trade on the S&P 500 can still thrive.”