What's going on?
Investors may be in for a holiday treat: a report published on Monday forecasts that the final weeks of 2019 will be full of cheer for the US stock market.
What does this mean?
The US market’s done well recently: an easing of US-China trade tensions sent stocks to a record high last week. And investment bank Evercore thinks that rise will continue: it believes stock prices will increase even further as a mooted reduced tariffs becomes more likely. Evercore also reckons the US economy is healthier now than six months ago – and with analysts’ estimates for companies’ future profit rising, stocks could rise 2% higher than currently (tweet this).
Evercore’s not the only bank feeling toasty. Last week, JPMorgan and Citigroup both recommended buying riskier assets – and Goldman Sachs predicted the party would continue into 2020, with a further 10% gain in US stocks up for grabs.
Why should I care?
For markets: Growth, not gold.
According to Goldman, “growth” stocks – those with fast-growing revenues and profits – do well when economic growth is between 0-3%. Given economic growth last quarter was 2%, the bank thinks we’re in the perfect environment for growth stocks to, erm, grow. It’s particularly keen on those which pay high dividends, thinking they’re undervalued by almost a third. Other analysts think smaller US companies could also benefit: their domestic focus insulates them from trade drama, but they’ll still reap rewards if tariffs are lifted and the economy grows. It’s bonds and precious metals (like gold) which investors will likely sell in order to buy stocks.
For you personally: Hold steady.
If you’ve got a portfolio that’s balanced across stocks and bonds, you probably don’t need to do anything different to profit from this – or from the inevitable swing back towards safety when a slowdown does come. But you do need to make sure you rebalance regularly: selling off some of your high-flying stocks if they start to make up too much of your portfolio.