By Joyce Yu
Wall Street extended its rally today after reports of planned trade talks between the United States and China sparkling hopes of a potential resolution to their trade spat. Some analysts are optimistic about the US stocks market for the rest of the year despite a number of uncertainties.
“Many investors remain cautious about the market’s ability to break through,” Stephen Auth, chief investment officer for equities at Federated Investors, noted in a recent report. “Fearing a correction, they’re developing lists of things that could go bump in the night. They may be waiting in vain.”
Auth opined Fed will likley slow its rate hikes next year because inflation has remained low, and trade talks between the United States and China will improve.
US markets have demonstrated to be resilient as other major global indexes have fallen. China’s Shanghai Composite is down more than 25% from its 52-week high, while Japan’s Nikkei is also lower for the year. Major European stocks market such as Germany’s DAX and the UK’s FTSE 100 failed to advance in 2018. On the contrary, the US stocks market, after a turbulent first half, is back on track toward record highs.
LPL Financial market strategists John Lynch and Ryan Detrick wrote in a recent report that “We expect more ups and downs over the rest of 2018; but that doesn’t mean the bull market is nearly over.” They added that more government spending, healthy earnings and low inflation mean that this economic expansion and bull market could potentially last years into the future.
Unlike many stocks which gradually climbed back from recent lows, shares of semiconductors such as Microchip Technology, Applied Materials and NXP Semiconductors all suffered declines which might represent opportunities to buy on the dip.
Paul Meeks, chief investment officer at Sloy, Dahl & Holst, thinks “There’s no question that near-term fundamentals are OK and valuations are deeply oversold.” Speaking on CNBC’s “Trading Nation.”, he said, “We might be entering a down cycle in some of these businesses, but it is going to be more transitory than people think and it’s also going to be less steep than people think.” “High-growth markets such as artificial intelligence and big-data analytics could offset a slowdown in PC and smartphone demand”, Meeks added.
Besides semiconductor plays, some tech stocks also underperformed of late. Netflix’s shares, has fallen 20% since recoding historic high in early July. Life is not easy for Tesla as well with slashes in its target price. JPMorgan cuts its price target on Tesla stock, saying any deal to take the electric car company private appeared much less developed than it had earlier presumed. Over the weekend, Reuters reported that PIF, the Saudi Arabian sovereign wealth fund that Chief Executive Elon Musk has said could help fund a go-private deal, is in talks to invest in aspiring rival Lucid Motors Inc.