By the end of this week, the first six months of the year will be completed and the surprises along with the price trends were nothing short of extraordinary. But now the important question arises that whether valuations and pricing are six months ahead or behind. The answer to this will decide the direction of the markets for the remaining year.
It is an important question as global equities have risen by 11% with the S&P500 along rising by 15%. Even the bond markets have remained stable despite food and commodity inflation returning to the rising trend.
Within the last six months, Japan has come out with negative interest rates and Europe along with some other central banks has entered rate cuts. At the same time, the Federal Reserve started to reduce quantitative tightening, whereas Japan has started to tighten.
The focus now would be on whether the AI trend can convert into earnings or start to disappoint the estimates. Another important factor would be the escalation of conflict in the Middle East impacting oil prices.
The last major event due will be the USA elections. Last time the disturbance pre-election was way higher but if some level of it returns then current valuations are certainly 6 months ahead. But in the end, how much can impact the market pricing will be decided in time as answers start to roll in.
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