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5 Reasons to Stay Bullish on Stocks Despite Rate Hikes

  • S&P 500 getting in better shape as weak companies are purged and strong ones grow into large caps.

  • High cash yields to power Baby Boomer spending given their massive wealth and refinancing at low rates.

  • Economy still too hot for Fed to stop hiking rates, good for cyclicals and stocks.

  • Stocks a good deal even with higher rates when comparing earnings yield to real bond yields.

  • Equal-weighted S&P 500 stocks relatively cheap at 17x trough earnings with earnings pickup forecast.

businessinsider.com
Relevant topic timeline:
The S&P 500 has fallen nearly 5% in August, and opinions on whether stocks will rebound are divided among Wall Street firms and market commentators, with some, like Goldman Sachs and Fundstrat, remaining optimistic while others, including Michael Burry and David Rosenberg, are bearish.
The S&P 500 is nearing a new bull market, potentially leading to stock market growth, and investors should consider stocks like Amazon and Mastercard based on the holdings of Wall Street billionaires and their solid growth prospects.
The S&P 500 is showing signs of a new bull market, but some experts are cautious and want to wait until the index reaches its previous high, meanwhile, there are two stocks, Sea Limited and Upstart Holdings, that have the potential to more than double in value over the next 12 to 18 months based on analysts' price targets.
Bank of America believes that the stock market will continue to rise as investors' bullish sentiment contradicts their conservative portfolio positioning, suggesting there is still upside potential until hedge funds increase their exposure to cyclical and high-beta stocks and economic conditions deteriorate considerably.
The S&P 500 is close to reaching a record high, signaling the upcoming arrival of a new U.S. bull market, and investors should consider buying stocks like Roku and Datadog that have strong growth potential.
The markets are facing numerous headwinds, including an imbalanced U.S. economy, stubborn inflation, a looming recession in Europe and China, a bulging deficit, reduced market liquidity, rising geopolitical risk, and high price earnings ratios, making above-average cash reserves a sensible choice for investors.
Investors are unsure if the correction in the US stock market is over, as the possibility of a head-and-shoulders top on the S&P 500 is being discussed, although it is still uncertain if the consolidation will continue higher or lead to a downward trend.
Investors hold onto their risk-on hats as US job openings data drops, increasing the likelihood of a Fed pause on rates, and Asian equity markets rise in anticipation of the Federal Reserve's monetary tightening coming to an end.
The S&P 500 could experience significant gains in the coming months following the end of the current rate hike cycle by the Federal Reserve, with historical data showing positive returns after previous cycles and strong economic indicators supporting this trend. Investors are advised to consider investing in an S&P 500 index fund or industry-leading stocks like Amazon.
The fundamentals and technicals support a demographically driven bull market in stocks until 2034, but potential risks include inflation, interest rate-induced debt crisis, and refinancing problems, which could lead to a drop in the stock market. Comparing the S&P 500's score in August 2023 to historical patterns, the market seems confident and not indicating an imminent debt crisis or severe recession. Credit spreads also appear tame compared to previous crisis periods. However, the article notes the possibility of abrupt changes in the market and encourages openness to a wide range of outcomes.
Investors are bullish on the market in 2023, with the Nasdaq Composite up 30% and two leading ultra-growth stocks, Amazon and Apple, poised to benefit from improving market conditions and their strong positions in multiple industries.
For equity investors, the US stock market remains the best option due to Europe's stagflation crisis and a property downturn in China, which have sparked an investor exodus from those regions.
The top 25 stocks in the S&P 500 outperformed the index in the 35th week of 2023, with tech stocks leading the way, suggesting a return of bull markets and a decrease in recessionary fears; however, market health, the balance between developed and emerging markets, and investor behavior still need to be addressed. Additionally, market correlations have dropped since COVID, and on "down-market" days, correlations are 5% higher than on "up-market" days. Market correlations also decrease during upward economic cycles. Retail investors are showing a preference for dividend-driven investing and investing in AI stocks. The global subsidies race is impacting valuations in tech and leading to supply chain inefficiencies. As a result, there are opportunities for diversification and investment in a wide variety of equities and bonds.
The stock market is still in an uptrend despite a recent pullback, and there is a likelihood of higher stock prices in the near term as long as the market continues to advance within its uptrending channel. Additionally, the recent breakout in the S&P 500 is a bullish sign for the market, and commodity-related stocks have begun to outperform, making them attractive investments.
As the market approaches a bull market, investors should consider adding growth stocks to their portfolio while maintaining a strong position in safer plays, rather than completely revamping their portfolio with every change in the market, in order to achieve long-term gains.
Despite the pressure on the market, the major US equity indexes have held steady near their recent highs, with the S&P 500 up 16.21% year to date and the Nasdaq Composite up 31.6%, raising questions about whether the current market weakness is due to seasonality or potentially something more significant like inflation.
Bank of America predicts that the S&P 500 could surge over 25% within the next year based on a bullish indicator, with low long-term profit growth expectations among analysts signaling potential gains.
Investors are becoming increasingly cautious about the US stock market and the economy as 2023 draws to a close, leading to a more defensive investment approach by Wall Street banks and experts warning of potential pain ahead.
US stocks remain steady as investors anticipate the Federal Reserve's interest rate decision and closely watch negotiations in the US auto workers strike.
The bull market in stocks remains strong despite various concerns, as indicated by the low CBOE Volatility Index (VIX) and rising corporate earnings estimates.
US stocks traded higher on Friday as the S&P 500 and Nasdaq Composite recovered from recent declines, but they are still on track for a third-straight weekly decline due to rising bond yields and a stronger dollar following the Federal Reserve meeting.
Three potential areas of value for investors to consider diversifying into include gold, European stocks, and small-cap US stocks, with each offering different advantages such as stability, value, and potential growth, according to the article.
US small-cap and industrial stocks are dropping, typically signaling a recession, but some investors are dismissing the moves as noise for now, with hope for stocks coming in the form of anticipated earnings season and the Federal Reserve's forecast of stronger economic growth.
Stocks took a hit last week, with the S&P 500 and Nasdaq decreasing, while the dollar shows potential for a major breakout and rising interest rates pose more trouble for stocks.
The recent market pullback continues as the S&P 500 is down 2.9% for the week and 5.9% below its high-water mark, but the broadening of market participation is a positive indicator for the sustainability of the bull market.
The S&P 500's potential for a long-term bull market relies on it surpassing a key level.
Bank of America's head of US equity & quantitative strategy, Savita Subramanian, predicts a bullish case for the final quarter of 2023, stating that there are more bullish indicators for mid and large-cap stocks, including the opportunities in AI and a "renaissance" for US manufacturing, suggesting a recession has been averted; stocks such as Nutanix and Fisker are recommended by analysts at Bank of America as good investment opportunities.
Despite the relatively calm appearance of the stock market, there are many underlying issues that could pose risks, including the debt ceiling crisis, potential default on U.S. debt, tensions with Russia and China, ongoing effects of the pandemic, and uncertainty about the future direction of the economy. Therefore, while investors should remain in the market, it is advised to hedge bets and diversify holdings.
The recent two-week selloff in the stock market confirms a weak market and raises the possibility of new lows, indicating that the so-called bull market was just a rebound and the next bull market will be driven by different factors. Investors should focus on traditional fundamentals and cash reserves rather than poor investments.
Surging bond yields are causing concern among investors that the highly-valued shares of tech and growth companies, known as megacaps, may be vulnerable to a stock market decline. The seven megacap stocks, which include Apple, Microsoft, and Amazon, account for over 80% of the S&P 500's total return for the year, but rising bond yields could deflate their value and impact the broader index. Higher bond yields increase the cost of borrowing for corporations and households, while also presenting more competition for stocks as an investment.
Smaller-cap stocks with lower valuations are expected to outperform mega-cap tech stocks, driving the S&P 500 higher, according to analysts.
The S&P 500's stability at the 4,200 level is crucial for determining the continuation of the bull market, with chartists and investors closely monitoring the 200-day moving average and potential implications for long-term trends and investor sentiment.
The US stock market is experiencing a concerning situation with "bad breadth," as the S&P 500 equal-weighted index falls into correction territory and major equity indices give up all their gains for the year, raising risks of heavy reliance on a few megacap stocks.
The dominance of the seven largest stocks in the S&P 500, including Apple, Microsoft, and Amazon, may indicate a brittle bull run and weak market breadth, causing concerns among financial experts. However, there is no need for drastic actions, and investors should stick to a disciplined investment plan and ensure diversification.
Equity markets are prone to boom-and-bust cycles, and a recent study suggests that valuations, macroeconomic factors, and technical variables can help predict large drawdowns in these markets, with the US acting as a fundamental driver of global equity market fragility. The research also highlights the importance of expensive valuations in predicting lower future returns and increased market fragility, indicating the need for caution among investors. Increasing allocations to international equities and small-value stocks may help mitigate these risks. However, it's important to approach forecasts with skepticism and consider a wide range of potential outcomes.
Despite challenges such as surging Treasury yields and Federal Reserve hawkishness, the equity-investing landscape has shown resilience, with the S&P 500 posting modest gains and the Nasdaq 100 up for the week. Investors remain optimistic about the economy's ability to withstand higher borrowing costs and anticipate positive revenue and earnings growth. Credit markets have remained stable, while volatility has remained muted and profit strength in Corporate America is expected to drive stocks.
The S&P 500 has entered a bull market, marking a rise of 20% or more from its recent low, with hopes that the economy will continue to defy predictions of a recession caused by high inflation and aggressive measures taken by the Federal Reserve. However, concerns remain as the Fed is expected to continue hiking interest rates and the gains in the market have mainly been driven by a small group of stocks, raising sustainability concerns. Bull markets typically last around 5 years with gains of 177.8%, while the previous bull market lasted 21 months and the current one began on Oct. 13, 2022. The recent bear market ended on Oct. 12, 2022, with a duration of nine months and a drop of 25.4%.
US stocks are currently at their most expensive levels compared to the debt market in over two decades, raising concerns of a potential market correction similar to the dot-com crash in 2000. Research has shown that this level of stock valuation has historically triggered major market corrections.
The S&P 500 and Nasdaq saw declines as megacap stocks overshadowed positive earnings from major U.S. banks, while the Dow Jones Industrial Average rose, and concerns over the conflict in the Middle East led to a rally in safe-haven assets.
Tech giants are driving the positive performance of the stock market, while small caps are struggling; however, there may be an undervalued and rising opportunity in streaming stocks.
Investors are turning to U.S. stocks as the safest bet amid a challenging global political and economic landscape, leading to a shrinking pool of investable markets outside the U.S.
The S&P 500 is at a crucial moment as it is caught between key technical levels, and the next phase of the bull market hinges on a breakout; year-end seasonality is expected to be positive for the stock market.
U.S. stock investors are facing challenges as the benchmark 10-year Treasury yield approaches 5%, a level that makes government debt more appealing than stocks and hinders economic activity, causing equities to lose value.
Big tech giants Amazon, Apple, Microsoft, Meta, Alphabet, Tesla, and Nvidia dominate the stock market, representing almost 30% of the S&P 500 market cap, while investors anticipate their third-quarter earnings reports.
Seasoned investors view market corrections as opportunities to increase allocations, while newcomers may get jittery, according to experts. Although mid and small caps are more volatile, they have the potential to deliver better returns in the long run. Investors should align their risk appetite with their portfolio and consider investment options such as index funds and active funds in the mid-cap and small-cap sectors.