There is common sense that valuations are expected to normalize as interest rates decline, although the timeline for the first rate cut is still unknown. This is because lower interest rates generally lead to higher demand for assets, which in turn drives up prices.
However, as valuations adjust to reflect this new reality, the market is expected to become more balanced and less volatile. In the long run, this normalization of valuations should provide a more stable foundation for sustainable growth in asset prices.
Moreover, the normalization of valuations will also be supported by improved economic conditions. As the economy recovers from the pandemic and demand begin to pick up, corporate earnings are expected to increase, further supporting asset prices. Additionally, policy measures implemented by governments and central banks to stimulate the economy will also aid in the normalization of valuations.
However, it's important to note that the normalization process may not be smooth, maybe it is a bumpy road. There may be periods of volatility as markets adjust to the new normal. Therefore, investors should remain vigilant and maintain a diversified portfolio to mitigate risks while investing in the certain stocks.
If you want to know more details to provide support for your investment and business activities, this financial report that we have selected for you can give you what you want, please subscribe to read it. FORESIGHT which is the preeminent internal reference about equity markets, will provide more forward-looking and compelling investment suggestions to investors.
Subscribe to -unlock this article
Audience
per year
Subscriber