Massive Capital Flows Fueled November Rally In Stocks. Can It Continue?

The monitoring of global capital flows is an integral part of our analysis because of their rich informational content and ability to provide early warning of trend changes

The strong rally in global equities in November was conspicuously led by massive inflows into American stocks. The November election results have been very well received by investors, as was the prospect of several effective vaccines being made available before year-end. The United States’ position as the world’s largest economy, and the dollar’s ongoing role as the reserve currency, has made U.S. stocks the first choice for both domestic and foreign investors.

The current combination of extreme investor sentiment and unprecedented stimulus efforts by central banks and governments raises the potential for sharp changes in capital flows which could produce significant market volatility.

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