Both Wall Street and Europe are rallying as optimism and risk-appetite return to equity markets.
Thomson Reuters’ John Noonan said that it was largely sentiment that “the glass is half full again” that was driving the market.
“I think it’s a combination of factors. One, they’re ticking the boxes. Is Brexit going to be a hard Brexit? It’s less likely [and] one less thing to worry about,” Noonan said, after British MPs voted against leaving the EU without a deal.
“They also believe that central banks have their back…every time a central bank around the world opens their mouth they seem to say, that they’re going to be very patient and continue to support the market with accommodative policy,” he added, referring to the reluctance of central banks to raise interest rates.
Meanwhile, Chinese President Xi Jinping’s announcement that “important progress” had been made in ongoing trade talks with US trade representatives allayed another fear of investors.
“Are China and the US going to come up with a deal? More likely. They will avoid an escalating trade war,” Noonan said.
“That was good enough, let’s bring the market higher,” he added.
While Noonan believes that the market will continue rising in the short-term, there are still significant global risks that threaten to derail growth heading into the end of 2019.
“Everyone is looking quite optimistically at things and that was despite some pretty dour data from around the world. The data really hasn’t been that great,” Noonan explained.
“If China slowdown continues, if the US has peaked… then towards the last half of the year it might be very difficult for companies to justify their valuations in this slowing global economy.”
Watch Noonan’s analysis in the video above.