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In a spectacular quarter, the US stock market recovered almost entirely from its 2018 correction, with the Dow Jones approaching 26,000 points and the S & P 500 surpassing November levels.
Since December 24, the Dow Jones has rebounded from 21,792 points to 25,928 points of 18.9% and the S & P 500 posted a similar performance, from 2,351 points to 2,834 points of 20%.
While strategists remain cautious about the Dow's short-term performance because of the geopolitical risks stemming from the US-China trade war and the weakening of the eurozone economy, the strength of the US market could lay the foundation for a rally throughout 2019.
Biggest quarterly gain for Dow and S & P 500
According to the WSJ, the US stock market recorded its biggest quarterly gain in about a decade, mainly because of the Federal Reserve's long-awaited decision to maintain its key rate until the end of the year.
One of the major concerns of many investors in recent weeks has been the rapid increase in stock values in a short period of time that could partially reduce the appetite of individual investors in the US market.
In December, many investors returned to their positions on the US stock market primarily for fear of missing out on FOMO, as the Dow nearly reached bear market levels in the 21,000-point region.
Earlier this week, Phil Blancato, CEO of Ladenburg Thalmann Asset Management, suggested that if investors over-sold their stocks in December, throughout the months of January and February, many investors would be outbidding themselves.
For the Dow and the rest of the US market to continue, it would be a powerful stimulus in the context of the global economic slowdown.
"The irrational moment of December was just that, a moment driven by the sale of taxes, algorithms and people who were extremely moved by the headlines. While December was oversold, January and February were overbought. The reason is that although stocks have been cheap for a brief period, the economy is not strong enough to generate a 12% return on the stock market in an environment like this Said Blancato.
It is hoped that the recovery plan would consist of a comprehensive agreement with China, which would be in its final phase of compromise on industrial policy changes and trade agreement implementation strategies.
Some have speculated that the struggle of the Chinese national economy could push the two negotiators to find an agreement in the coming months.
The proposal by some officials of the Federal Reserve to extend its decision to maintain its benchmark interest rate until 2020 could also fuel investor confidence in the stock market.
On March 25, Charles Evans, chairman of the Chicago Federal Reserve, said he was not planning to increase rates until the second half of 2020.
Mike Ryan, head of investment at UBS Global Wealth Management, told the WSJ that officials at the Federal Reserve have finally learned about global economic data and investor expectations in the United States.
The steep decline in the Dow and S & P 500 indexes in December would have been caused by investors' fear of potential rate hikes, which seems very unlikely by the end of the year.
Not all optimists
The Dow has tested the level of 26,000 points over the last month and has remained relatively stable just under 26,000 points.
Some strategists do not expect the Dow to recover beyond key levels in the near term due to the lack of stimulus in the domestic market.
"We do not anticipate a surprise strong enough to push share prices to a much higher level than now," said Tracie McMillion, head of Global Asset Allocation Strategy at the Wells Fargo Investment Institute.
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