I may be naieve but to my eye the overall chart pattern for XSO & XAO simply points due North, and logically (IMHO) should continue to hold or strengthen until dividend yields are slightly more than interest yields (to reflect a risk component)?
I/Rates (yields) should remain low (everyone has borrowed too much to allow rates to increase) so that investors should focus on stock selection, for company growth and consequent dividend or capital gain yield potential? Spec stocks seem risky as global growth is not a given in the forseeable future, but those stocks are still fair game if they fit your risk tolerance as some will win and some will lose.
"Covid" has resulted in extraordinary cash injections into many economies via wage protection, mortgage deferral, business loan schemes/grants etc, while the bulk of the public can't freely travel internationally yet many are saving or consuming locally, but not getting a "real" return on savings from their banks. Super funds and insurance companies must be finding bond rates/margins so low that even leveraging can no longer achieve the returns they require, so they too must now look at stocks.
One question may be will these circumstances prove inflationary or not? The inflationary pressure may come from the supply side as many supply lines (including food) are tested, rather than the usual increase in demand, even with the new cash that is circulating.
Same argument from another perspective, what could cause stock markets to "crash" and stay down when there is no yield alternative? The banks are already battling and doomed so it is unlikely to be bank failure as alternatives are already in place. If major indexes fall, the rest may be caught in a downdraft short term. I can see a US vs China battle over Taiwan who now hold an apparent microchip sector edge, causing mayhem with the big US Tech stocks vulnerable.
Does the answer to the question we constantly ask ourselves simple - invest in resilient stocks that may lead their sector into the future? It really is different this time - historically low interest rates and unprecedented cash flooding the markets. Even a recession/depression will have winners.
I welcome any ideas. Good luck to all investors.
(20min delay)