From the floor of the New York Stock Exchange to the ticks of automatic trading on the National Association of Securities Dealers Automated Quotations - commonly known as NASDAQ and even the buzzing of the blue chip stocks of Deutscher Aktienindex (DAX) on the Frankfurt Stock Exchange, one thing is evident that the major stock markets around the globe has seen a major rally and setting new record highs in the first quarter of 2017.

While argumentatively, all along many persisting bearish factors were and are still present to halt and possibly even more strongly favour the short positions taken in stocks and a major decline of stock market indexes around the globe. Just to list a few of such reasons are:-

  1. Prior to the US federal election night of November 8th, 2016, then as a candidate of the Republican party the present US President Mr. Donald Trump had a substantial impression on investors that he may end up hurting the stock markets and the overall investors' sentiment was supportive for an extremely bearish impact on the stock markets should Mr. Donald Trump become the president of the United States of America. Interestingly, the stock markets reacted positively shortly after and has continued since then to simply just go higher!

  2. Even as most recently in the last weeks of March 2017, the failed attempt to repeal and replace the Patient Protection and Affordable Care Act, often shortened to the Affordable Care Act (ACA) and ultimately its withdrawal due to lack of support in the US Congress before the congress representatives had got a chance to vote on a reform bill prepared by the administration of the US president - Mr. Donald Trump. Thus, certainly proving that there are many more obstacles in the near future for the US president and his other mandates that has been interpreted as benefiting for the stock market can simply be just a dream and may never become a reality. Yet, there was the most fastest recovery of the approximately 1% drop in the US stock markets and further boosting the Asian and European stock markets with it.

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  3. Brexit is happening! In the very same own words of the UK's prime minister Ms. Theresa May, "We understand that there will be consequences for the UK of leaving the EU,' spoken before the UK Parliament on March 29th, 2017 while triggering Article 50. On the contrary, not only did the The Financial Times Stock Exchange 100 Index, commonly called as the FTSE 100, or informally as the "Footsie", opened higher on March 29th, 2017 but closed even more higher on that same day.

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  4. The continuation of uncertainty and risk from scenes of the European political arena!

    - The Scottish National Party (SNP), which is the governing party in Scotland has proposed a second referendum on Scottish independence in order to protect Scotland's place in the EU following the UK's triggering of Article 50 for Brexit.

    - In France, Ms. Marine Le Pen, the far-right candidate hopeful for France's presidential election is gaining popularity and momentum. Ms. Le Pen's manifesto includes a Frexit promise which can be devastating for the European Union should she win in the upcoming presidential election of France.

    - The apparently never ending Greek government-debt crisis continues! Yes and what is new this time is that on February 20th, 2017, the Greek finance ministry reported that the government’s debt load is now €226.36 billion after increasing by €2.65 billion in the previous quarter, placing more strain on the European Union.

    - Surge of The North Atlantic Treaty Organization (NATO) engagement in the European Union's Balkan nations. Is it that just the cold war is back or should we prepare for the worst case scenario that we could possibly be on the verge of witnessing a NATO vs Russia+China world war ?

    - & the list goes on for the issues emerging from the European zone..

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  5. Chinese growth concerns are mounting and there seems to be no signs of a bullish trend in sight, thus leading to reversals in global equity markets.

  6. Global glut of crude oil and its impact on the Organization of the Petroleum Exporting Countries or best known as OPEC, has also been limited to put any dent on the stock markets of the 13 nations that make up this pact, which are Algeria, Angola, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. According to the current estimates published on the official website of OPEC (Click Here to visit) , more than 80% of the world's proven crude oil reserves are located in OPEC Member Countries, with the bulk of OPEC oil reserves in the Middle East, amounting to 65% of the OPEC total.

So do the stock market indices really deserve this big boost that it has enjoyed in the first quarter of 2017, or is it just a big bubble based on speculative investors' sentiment of excessive economic optimism ? I personally believe it is both and I shall explain it as following:

  • Most of the stock prices deserve going higher due to the fact that a majority of companies have gradually increased their earnings and revenues Quarter-on-Quarter & Year-on-Year in the recent past couple of years, thanks to the inflation driven global economy. However, the profit to earning ratios of most of the stocks today are near exceeding their long-term averages and a correction in their prices are not only needed but will take place.

  • While optimism along with evident facts is a good thing when buying stocks and as for an example we may look in to the success of the bull rider Mr. Warren Buffet's career in the stock market, recklessness on the other hand can be devastating when actual evaluation of a stock or the stock markets' positive current data is all together ignored, as such for an example no one else fits a best description other than the bear master Mr. George Soros, whom according to the Wall Street Journal has lost nearly $1 billion USD$ since the US federal elections (Read the full story on Wall Street Journal @ Billionaire George Soros Lost Nearly $1 Billion in Weeks After Trump Election ).

  • Nonetheless, if we examine the current margin debt of various stock exchanges around the globe, it clearly can be noticed that new historical highs have been made in terms of margin debts across the globe. For example: the New York Stock Exchange which publishes end-of-month data for margin debt on the NYX data website (Click Here to visit), has posted a margin debt of $528,160,000,000 at the end of February 2017. Lest we forget: the main engine behind the market crash during the great depression was indeed that investors had doomed themselves in margin debts that they could not cover when the market turned bearish.

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