On a high: the US Federal Reserve
A hawkish U.S. Fed is likely to be the biggest threat to the bull market in stocks
Global stocks kicked off the new year by rallying to reach new lifetime highs. Major indices (सूचियाँ ) across the U.S., Europe, and Asia witnessed significant gains in the year’s first two trading days; the Indian bourses (विदेशी मुद्रा बाज़ार) were slower to gain traction (खिंचाव). The strong start suggests that stocks may be all set to carry on their momentum from 2017, which saw major indices offering solid double-digit returns to investors. A significant feature of the present bull market in stocks has been its broad-based participation, with both developed and emerging markets benefiting from it. The S&P Global Broad Market Index, for instance, rose by an impressive 22% during the year. Indian stocks are among the biggest winners of the rally. Macroeconomic tailwinds (अनुवात ) such as improving economic growth in the U.S., Europe and emerging markets, better corporate earnings, and tax reforms passed by the Trump administration could explain some of the euphoria (उल्लासोन्माद). But the extreme broad-based nature of the rally adds to fears that it may be driven primarily by excess fund flow into stocks rather than a secular (धर्मनिरपेक्ष) improvement in economic fundamentals. The weakening of the U.S. dollar during 2017, along with the strengthening of emerging market currencies like the Indian rupee, raises further suspicion (सन्देह) that the global stock rally may be about nothing more than excess liquidity (नकदी). Investors starved (भूखा) of yield have been happy to bid up stocks in countries like India and China.
The major risk facing the present bull market, of course, is the prospect of a quicker end to the accommodative (सरल) monetary policy adopted by the U.S. Federal Reserve. After all, the dovish (शांतिवादी) monetary policy since the global financial crisis of 2008 has clearly played a major part in fuelling (उत्तेजक बात) the second-longest bull run in U.S. market history. With the return of higher economic growth in the U.S., inflation is bound to spike up and force the next Fed chair to raise rates at a faster pace. Apart from deflating (आत्मविश्वास कम करना) the rally in domestic U.S. stocks, this is also likely to improve the yield on American assets and cause capital to flow out of emerging markets. In addition, any repatriation (देश-प्रत्यावर्तन) of dollars by U.S. corporations, which are incentivised by the new corporate tax policy, is likely to exert pressure on non-dollar currencies. Meanwhile, the price of gold — a safe haven asset — rallied 14% last year, which is the metal’s best performance since 2010. This suggests that investors in at least some corners of the market believe the end may be near for loose monetary policy. The ‘taper tantrum’ of 2013 had served as a timely warning to emerging markets about the fickle (चंचल/अस्थिर) and disruptive nature of global capital. While predicting market trends is a fool’s errand (काम), it seems the end to this bull market might be sooner than later.
1. Indices: an arrow-shaped piece on a dial or scale for registering information
Synonyms: hand, pointer, indicator, needle
Words Related: dial, face, gauge (also gage)
2. Bourses: A stock market in a non-English-speaking country, especially France
3. Traction: The extent to which an idea, product, etc. gains popularity or acceptance.
Synonyms: grip, friction, adhesion, purchase, resistance, pull, haulage, propulsion, drag
Antonyms: slipperiness, berth, push, repulsion, broaden, slickness, case, chemise, devilment
4. Euphoria: a state of overwhelming usually pleasurable emotion
Synonyms: cloud nine, elatedness, elation, ecstasy, exhilaration, heaven, high, intoxication, paradise, rapture, rhapsody, seventh heaven, swoon, transport
Antonyms: blues, dejection, desolation, despair, despondency, disconsolateness, disheartenment, dispiritedness, doldrums, downheartedness, dreariness, dumps, forlornness, gloom, gloominess, heartsickness, melancholy, mopes
5. Secular: not involving religion or religious matters
Synonyms: nonreligious, profane, temporal
Antonyms: consecrated, hallowed, holy, sacrosanct, sanctified, churchly, devout, godly, pious, prayerful, reverent, worshipful, ethereal, insubstantial, metaphysical, unsubstantial
6. Suspicion: a feeling or attitude that one does not know the truth, truthfulness, or trustworthiness of someone or something
Synonyms: distrust, distrustfulness, dubiety, dubitation [archaic], incertitude, misdoubt, misgiving, mistrust, mistrustfulness, query, reservation, skepticism, doubt, uncertainty
Antonyms: assurance, belief, certainty, certitude, confidence, conviction, sureness, surety, trust
7. Liquidity: Cash, cash equivalents and other assets (liquid assets) that can be easily converted into cash (liquidated). In the case of a market, a stock or a commodity, the extent to which there are sufficient buyers and sellers to ensure that a few buy or sell orders would not move prices very much
8. Starved: feeling a desire or need for food
Synonyms: empty, famished, peckish [chiefly British], hungry, starving
Antonyms: engorged, glutted, gorged, overfed, overfull, overstuffed, replete, stuffed, surfeited, full, sated, satiate, satiated, satisfied
9. Accommodative: willing to do a favour
Synonyms: accommodating, friendly, indulgent, obliging
Antonyms: hinder, deny, refuse
10. Dovish: inclined to live in peace and to avoid war
Synonyms: peaceful, pacific, pacifist (or pacifistic), peaceable
Antonyms: aggressive, bellicose, belligerent, combative, contentious, discordant, pugnacious, quarrelsome, scrappy, truculent, bloodthirsty, hawkish, martial, warlike
11. Fuelling: A thing that sustains or inflames passion, argument, or other intense emotion.
Synonyms: power source, heat source, combustible, propellant, encouragement, incentive, ammunition, incitement, stimulus
12. Deflating: Make (someone) suddenly lose confidence or feel dispirited
Synonyms: subdue, humble, cow, humiliate, mortify, chasten, chagrin, dispirit, dismay, discourage, dishearten
Antonyms: enlarging, good, aggrandizing, appreciating, billowing, ballooning, distending
13. Repatriation: The return of someone to their own country
Synonyms: renovation, redemption, restitution, remodeling, reinvigoration
Antonyms: destruction, penalty, abolition, neglect
14. Fickle: likely to change frequently, suddenly, or unexpectedly
Synonyms: capricious, changeable, changeful, flickery, fluctuating, fluid, inconsistent, inconstant, mercurial, mutable, skittish, temperamental, uncertain, unpredictable, unsettled, unstable, unsteady, variable, volatile
Antonyms: certain, changeless, constant, immutable, invariable, predictable, settled, stable, stationary, steady, unchangeable, unchanging, unvarying, dependable, reliable, sure, tried, tried-and-true, true, trustworthy, trusty
15. Errand: a short and quick trip to accomplish a specific purpose, as to buy something, deliver a package, or convey a message, often for someone else
Synonyms: duty, assignment, commission, job, mission, charge
16. Bull Market: A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, currencies and commodities.
17. Taper Tantrum: The term taper-tantrum has been widely used to define how the markets reacted to the comments by Federal Reserve Chairman, Ben Bernanke, that the Fed might slow down, or taper, the rate of bond purchases, which is part of its quantitative easing (economic stimulus) program.