With the US stock market near record highs and the country’s economy continuously developing, many investors and other market participants are still sceptical of what the future holds. Let’s take a look at the recent performance of US equities, and what stocks you might want to keep your eye on in the next 6 months.
US equities performance in 2019
Thanks to a seemingly strong start to the year with continuing positive trends, investors have all the reasons to be satisfied with the overall performance of equity markets. However, interest rates and the US-China trade war remain huge risks, looming large in stock market forecasts for the second half of the year.
After an alarming fourth quarter in 2018, the S&P 500 and Nasdaq 100 found themselves in bear market territory, suffering from losses of over 20% by Christmas. However, shortly after, the yield curve inverted, establishing a trade truce. In January, the market saw the S&P 500 up 7.9%, making it the best first quarter for the index since 1987. As a matter of fact, the Federal Reserve, or simply the Fed, can take credit for much of this year’s opening.
During the last month, the stock market rode a wave of optimism due to more promising outlook for US-China trade tensions and continued belief in a potential interest rate cut by the Fed. In June, the Nasdaq Composite remained the leader, gaining an impressive 7.42%, while the Dow and the S&P 500 rose 7.19% and 6.8% respectively.
Moreover, stocks have also gained on the news that the US and Mexico have averted further tariffs on Mexican imports. However, the event lost its momentum as soon as shipping disruptions in the Gulf of Oman caused tensions in the Middle East region.
Nonetheless, in July, stocks continued to rally.
Interest rates, trade wars and the stocks: what the future of US equities looks like
The first half of 2019 was nothing but a wild one for investors, with the S&P 500 gaining an impressive 20%. The ride wasn’t always a smooth one, with concerns over slowing economic growth and global political ambiguity creating volatility in the market.
As the second half of 2019 begins, trade troubles still bother investors. Even though presidents Xi Jinping and Donald Trump have agreed to resume trade talks and hold fire on new tariffs during the G20 summit in Japan, the issue is still clouded with uncertainty. When it comes to future forecasting, surprising twists and turns in the trade war tale make it more difficult to estimate.
Investors hope the Fed will cut interest rates in the second half of the year, offsetting the effects of a tariff outbreak. As such, stocks are predicted to keep rising on favourable chances for at least a couple of interest rate cuts.
So far, fears over a US recession happening this year have proven unwarranted, but investors are understandably concerned about what’s coming next. What should we expect in the next six months of 2019?
Trying to predict the stock market’s future is about as effective as forecasting the number of rainy days in a year. However, investors can still prepare themselves by learning about the market conditions and paying attention to the factors that could change for better or for worse.
According to key economic indicators, the US economic outlook is healthy: Q1 economic growth remained unchanged at 3.1%, while government contributions, exports and business spending were higher.
The GDP growth rate is expected to stay between the 2%-3% range. Therefore, with business regulation dismantled, manufacturing returning, US oil production growing and low corporate taxes continuing, the overall economic situation looks as good as it has ever been.
The majority of industries, except for utilities and real estate, showed a significant increase in June, led by strong gains in materials (+7.85%) and technology (+6.48%). Other sectors have also improved in prices, including consumer discretionary (+4.79%), industrials (+3.84%), health care (+3.09%), communication services (+1.60%), energy (+2.21%), financials (+1.30%) and consumer staples (+1.03%).
The stock market crisis of 2018 is seen as a transition, leading to new record levels for the majors like the Dow, S&P and Nasdaq. Investors can finally exhale as the economy shows resilience, recession fears fade, inflation is subdued and the Fed lowers interest rates.
Market forecasts look rather promising. For example, according to Longforecast.com, the Dow is predicted to end 2020 quite spectacularly:
The same can be said about the S&P 500 Index:
What US equities can you invest in the second half of 2019?
As a matter of fact, the best-performing sectors of this year are notably different from those of 2018, when healthcare and utilities were the only two that showed major gains. According to Lindsey Bell, an investment strategist from CFRA, information technology has taken the lead in 2019, increasing over 23% on a year-to-date basis. The real estate sector is also doing well – up 20%.
However, if you are keen to invest in more exotic stocks, you may want to consider IPOs. Even though there were some minor mishaps, the US IPO market is strong.
A principal at Renaissance Capital, Kathleen Smith, said: “Based upon the plans of many large private companies to tap the IPO market in 2019 and the strong returns for IPO investors, we think that the 2019 IPO market could see $75 billion to $100 billion of issuance”. World-renowned tech unicorns, including Lyft (LYFT), Uber (UBER) and Pinterest (PINS), brought much-needed capital as well as some fresh blood to the market after going public earlier this year.
As we enter the second half of 2019, other IPOs you might also want to keep on your radar include CrowdStrike (CRWD), PagerDuty (PD), Zoom Video Communications (ZM) and Rattler Midstream (RTLR). Though not all of these companies can boast of their earnings yet, they have witnessed steady sales growth.
Check our article on 13 investments you want to consider in the second half of the year.
Just like with any other market, investing in US stocks can give no guarantee of financial success. If you are not sure whether the future of the US equities looks bright or not, you can still try to profit from the market volatility through contracts for difference.
You can learn more about CFD trading with our comprehensive free online courses. Stay on top of the US equity market with the latest US equities news provided by Capital.com.