Stakeholders warn against purchasing fallout bargains: American stock markets find fresh avenues through resets
The US stock market is showing signs of recovery, with US stock index futures gaining on Wednesday, as indicated by a 0.6% rise in Nasdaq-100 contracts. This optimistic sentiment is partly due to the possibility of interest rate cuts by the Federal Reserve (Fed), which could alleviate concerns about a potential "bubble" following a four-month rally and a 30% gain in the S&P 500.
Federated Hermes, a leading investment management firm, has recommended buying US stocks on dips, citing solid company earnings as the reason. Goldman Sachs, another financial heavyweight, shares this view and has highlighted favourites like Walmart, McDonald's, Cadence, and Valero Energy as potential buys.
Steve Chiavarone, deputy chief investment officer at Federated Hermes, believes the current weakness in the stock market is only temporary and modest. He manages nearly $850 billion in assets and describes the decline in stock markets as healthy. Chiavarone expects potential buying opportunities in sectors tied to economic growth and interest-rate sensitivity.
Other market prognosticators, like Michael Wilson of Morgan Stanley, share Chiavarone's optimistic view on the long-term outlook for US stocks. Wilson believes the long-term outlook for US stocks remains good, given the possibility of rate cuts by the Fed.
Strategists at Evercore ISI expect the S&P 500 to rise by about 20% by the end of 2026, supported by bets on artificial intelligence. Betting on AI stocks is a significant factor in this expectation, despite the high valuations of AI stocks and tech heavyweights causing some investor concern.
Important labor market data will be released this week, which will influence the Fed's interest rate decision on September 17. The sell-off of bonds due to concerns about rapidly rising government spending is weighing on sentiment and causing significant price fluctuations in the bond market.
In conclusion, despite the concerns about high valuations and potential bubbles, experts remain bullish on the US stock market, citing solid earnings, positive guidance, good economic data, and the possibility of rate cuts by the Fed as reasons for their optimism.
