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.
