FX.co ★ Review of the US stock market for April 12, 2021

US stock indices showed steady growth on Friday. The Dow Jones stock index rose to 33,776 points, the S&P 500 index to 4,127 points, the NASDAQ-100 to 13,837 points. This suggests that investor capital continues to flow to the stock market. In principle, this is not surprising, since the American economy is recovering at a rapid pace, and accordingly, the shares of American companies are in demand on the stock markets. Also on Friday, the yield of the US 10-year Treasury bonds grew. The indicator increased from 1.629% to 1.662%. Recall that an increase in bond yields means a drop in demand for them and the sale of these securities by their owners. Thus, it turns out that the process of capital flow from the debt market to the stock market continues. For the stock market, the fundamental background has always been important, and it is the American one. Therefore, any speeches by Jerome Powell, Joe Biden, Janet Yellen, and other top US officials play an extremely important role here.

Fed chair Powell's rhetoric has been quite optimistic lately, although he has not yet given any signals about a reduction in the quantitative stimulus program or an increase in rates. Powell continues to insist that the economy is still on its way to full recovery, which is still at least a year away from completion. However, the IMF report shows that it is the American economy that will be the fastest in the world to enter the pre-crisis trajectory of economic growth. Thus, even though trillions of dollars are being poured into the US economy to stimulate it, which is negative for the dollar, for the stock market, on the contrary, this is great news. Americans start investing their surplus money because they are afraid of losing money due to inflation or the depreciation of the dollar. And since the most popular is the stock market, and not the cryptocurrency or bond market, then it is there that the flow of capital is mainly taking place. After the US authorities approved another $1.9 trillion stimulus package, which involved the distribution of "helicopter money" to Americans for $0.5 trillion, where do you think some of this money has definitely gone?

Unfortunately, many experts believe that the US stock market is now very bloated. And first of all, this applies to high-tech giants like Tesla, whose shares have risen 8 times over the past year. That is, we are not talking about systematic long-term growth, as, for example, in Microsoft shares, which reflects the expansion of the company itself, an increase in its revenues and profits, investments in new industries, and expansion of activities. We are talking about the banal demand for Tesla shares, which is the reason for the growth. A vicious circle, bitcoin-like growth. Thus, we would recommend investing your funds in the most stable companies of the leading American stock indices. But not in an upstart company. Perhaps they provide an opportunity to earn super profits, like bitcoin, but investing should not be overly risky.

The Dow Jones Industrial Average is showing steady growth. Recall that the Dow index includes the 30 largest American companies, thus, this index reflects the situation in all industries and services. Considering that DJI has been growing almost continuously for more than a year (the entire crisis period for the economy), while the economy was contracting during the same period and experienced serious problems, traders can clearly understand what a financial bubble is. So far, there are no prerequisites for the bubble to burst. The index is above the Kijun-sen line within two upward linear regression channels. The first is annual, the second is three months. There are no signs of a downward reversal at present.