How to trade stocks with a little foresight
Analysts are warning investors to put more stock in technology stocks as they look for a better-than-expected rebound from the U.S. presidential election and a more favorable outlook for the broader economy.
The Nasdaq Composite Index, which tracks stocks on a broad range of technology-related businesses, has shed more than 8% this year, and analysts have said they expect the index to fall another 8% by year-end, a level not seen since 2009.
Analysts say the U, Japan and other emerging markets are likely to perform better than expected, but the U., a technology-heavy economy, is likely to fare worse.
Analytics say investors are better positioned to profit from the economic rebound than they were in the early stages of the election cycle, when stocks were more volatile.
But some companies are showing signs of picking up as investors look for better- than-expected economic data.
Batteries maker Philips and automotive parts maker Delphi have been doing well this year amid a rebound in consumer demand, and they could benefit from the election’s outcome.
Philips has been trading at a 25-year high since last June, and Delphi has surged more than 10% this month.
Analysts expect Philips and Delphics to be profitable for at least another two years, said Robert W. Schulman, an economist at Fitch Ratings in New York.
The stock market has been up more than 100% since the presidential election, but its returns have come with risks.
The Nasdaq has rallied from its lows of the 2008-2009 financial crisis to its highs of the late 1990s, when the economy was still recovering from the Great Recession.
Investors are willing to bet on more economic growth than is typically the case, and so stocks have been able to rise.
The Dow Jones Industrial Average has also gained about 100% this decade, but some analysts say it is too early to see that trend continue.
The U.K. is likely next on investors’ minds after the election, and the economy has been slow to rebound in recent months.
The Bank of England is also keeping interest rates at their current low, a sign that the economy is recovering from a long recession, and some economists are predicting that the central bank could raise interest rates this year.
Investors are also weighing the prospect of a stronger economy.
The Dow Jones industrial average is up more now than in the past four years, and U.C.B.I. economic indexes are up about 5% for the year, its best performance in almost a decade.
The S&P 500 index, which measures the broad market’s performance over a broad set of assets, is up nearly 12% this week and has been gaining about 6% since late December.
The broad market is also more volatile than the Nasdaq, which tends to trade with a broader base of investors.
It is also trading at higher prices, and that is likely one reason the NasDAQ is up.