The US market rally

Various investment firms such as Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC) released statements about the recent market rally.

Bank of America: Why Investors Should Be Cautious about Rally

US markets (VFINX) have seen a strong rally after the US election. The S&P 500 Index (SPY), the Nasdaq Composite Index, and the Dow Jones Industrial Average Index (DIA) rose nearly 6.3%, 7.1%, and 8.8%, respectively, between November 8, 2016, and January 11, 2017.

Fund flows to US equities

The US equity market (SPY) (QQQ) has seen a huge funds flow since November 9, 2016. According to Bank of America Merrill Lynch, US equities have seen an inflow of $70 billion since November 8, 2016. Emerging market (EEM) equity and the bond market have been major losers since the US election, as they have experienced funds outflows of $10 billion.

As the US market is experiencing huge funds flows, most investment firms are expecting that US equities will provide a good performance in 2017. The optimistic view on the US economy is strengthening the investment firms’ expectations. However, it’s creating concern for investment products in other nations. Investment firms are also expecting that US equities may see a strong performance in the first half of 2017. However, in the second half of 2017, equities may see a drop.

In the next part of this series, we’ll analyze why emerging markets are suffering in this recent market rally.

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