Analysts at Natixis see a continued rise in share prices in the third quarter of 2021. Some are surprised or concerned about this prolonged rise in equity markets, which is driving them to high valuations. The analysts show that it is perfectly normal.
Investors do not believe in lasting inflation
“They have adopted central banks' scenario and do not believe inflation will last. If inflation is indeed transitory, then it is normal that long-term interest rates do not react to current inflation and remain low, which is obviously positive for equity markets.”
Companies have weathered the rise in production costs
“The rise in production costs stems from the rise in commodity prices and the rise in prices of semiconductors and maritime transport. Despite the rise in production costs, companies’ profit margins and earnings are high), earnings per share are increasing more than expected. This resilience of earnings is obviously positive for equity markets.”
Central banks continue to inject massive liquidity
“Central banks, which do not believe that inflation is permanent, continue to inject massive liquidity into economies, part of which is used to buy equities.”