With the recent bull market rally, market analysts are adamant that stock can continue to drive higher than we have ever seen in the history of the stock market. Is this true, have recent earnings been good enough to take us and soar past recent highs, or is this positivity just a house of straw with nothing to show and ready to be blown over in a gust of wind?
The months of August and September are notorious for dramatic declines in the stock market, and there are a select few analysts who are sending out a dire warning investors to be mentally and financially ready when if it does eventuate!
Stocks fell last week after a combination of weak retail earnings and bank stock performance spooked some investors.
"In the dog days of summer, we can get hit with lightning speed sell-offs, if we go back over 40 years, August and September have been notorious for seeing large and dramatic sell offs in the market.”
Rather than join the masses of scared investors in the next downturn, some analysts are seeing the other side of the coin. Meaning they are recommending clients to view it as a buying opportunity. That means having some cash available, and stock ideas on hand that could be put to work in a "cool and methodical" way.
Big Wall St, guru type investors have not been spooked by the sell-off last week. There are charitable trust took action and purchased stocks like Nvidia and Activision Blizzard on weakness. These are just some ideas going forward while market constituents watch the ebbs and flow with the market.
Despite the fact that everyone was freaking out, the positive backdrop for stocks didn't change. We have low inflation, low interest rates, good earnings and a weak dollar. So astute investors realise that sort of market environment can be very healthy in these dire times. Sometimes you have to look past the trees to see the forest!
Low inflation means that earnings for companies could be worth more in the future. Often considered by some as to be a huge wrapped up Christmas gift, as high inflation could erode the long-term value case for equities.
Additionally, low interest rates can act as a positive catalyst to spur business in the U.S., and prompt investors to buy stocks with strong dividends. There are no guarantees but the role of this article is to try and help readers weigh up the positives and negatives and make informed decisions from that.
Regardless of the positive implications of interest rates or inflation, some traders still have reservations. The first on the list would be that Congress is not in session currently. In this perspective, both sides of the aisle are at odds with President Trump. Thus, the market could move higher while Congress is not in session, and then be impacted negatively when it reconvenes in September. Hedge fund managers do watch the events in congress to make important decisions with their trades. So that might mean the stock market sits on shaky ground the next few months.
Other worries on market analysts list were technology stocks, the recent bounce in transportation stocks and interest rates.
Ultimately, a good strategy going into the worst two months or the year, might be for investors to start selling the worst stocks in their portfolio that have managed to go up as a part of the broad rally and have some cash on hand for the next downturn.