The main factor that plays against active investments in us stocks, is a cycle of monetary tightening, the fed, which has made it a rule to increase the key rate by 25 basis points every quarter. Add to this the increasing risks of trade wars and currency crisis in emerging markets, which was the first sign that indicate imbalances in the financial system.
Meanwhile, yields on U.S. Treasury bonds (Treasuries), that is, in fact, market interest rates in the United States. The yield on two-year securities for several months, exceeds the dividend yield of the S&P 500, making us stocks less attractive compared with government bonds.
Overclocking volatility will contribute to the mid-term elections in the United States, which will be held on 6 November. There is a significant risk that Congress will be completely controlled by the Democrats, which will increase the political polarization in the country. It could rock world markets.
Our medium-term target for the S&P 500 index I’d previously identified the 2650-2550 points at current value in excess of 2900 points. At the same time about the impending change of trend and signs of a recession in the United States to speak still early. The American economy is steadily growing, and the fed quite carefully suited to the process of raising rates. According to estimates FactSet research organizations, in 2018, you can expect to increase the consolidated earnings per share S&P 500 by 20.6% year-on-year, and in 2019 — by 10.3%.
Ideas for tomorrow
To reduce the risks associated with the fed rate hike, should adhere to simple rules:
— to avoid shares of companies with a high debt load and weak operating performance and securities with inflated multipliers;
snoring to treat traditional dividend sectors;
— look for interesting long-term stories and paper-beneficiaries of the growth rates.
Paper that you can buy in the expectation of long-term growth, less dependent on the fluctuations of economic cycles and focused on breakthrough ideas. Individual stocks have already had a good drop in price — most external negative factors played their quotations, and the potential for further falls is limited.
Such actions may include, for example, paper Facebook. The company is the undisputed market leader in new media, you’ll be financial stability and constantly innovates. Its service Instagram is popular among young people, the number of users reached 1 billion Ahead of the monetization of WhatsApp messenger.
No less interesting option — the semiconductor manufacturer Micron Technology. The last time investors were concerned about a possible glut in the market of microchips and the risk of a full-fledged trade war with China, which hit exports of products of Acer. But in fact before us is a company with a strong balance sheet indicators, with serious prospects of income growth and low multiples. In the spring, the Corporation announced a stock repurchase program by $10 billion Also worth noting is the shift of demand in the market of chips and semiconductors in the direction of more expensive solutions in cloud, mobile and autosegment.
Another attractive paper traded on the U.S. market, is the stock of Alibaba Group , a leader in the field of e-Commerce in China. China’s population exceeds 1.4 billion people use the Internet 57% of the citizens. For comparison, in the US it is about 83% of the population. This opens up broad prospects for e-Commerce in China. In addition, Alibaba carries out expansion abroad, including in India, with a population of about 1.3 billion people.
In the us market you can find a “defensive” stocks, which are less subject to fluctuations in turbulent conditions. First of all, this paper the traditional pharmaceutical companies and manufacturers of commodities.
You should pay attention to the actions of the American banks. The balance sheets of many financial institutions are designed so that if rates rise increasing interest margin, and hence interest income. A combination of factors, including market multipliers, it is interesting to look shares of Citigroup. Seem to be a good investment and securities , JPMorgan & Chase, but now these promotions is clearly overheated.
Despite fed rate hike, quite discounted dividend history is still not worth it, it’s a good alternative to Bank deposits. You can look at the shares of the Telecom giant AT&T, the retailer Macy’s and the leader of the American automobile industry , General Motors. Their dividend yield is a very respectable 4-6%. However, before buying these shares, you need to wait for their drawdown. At the same time increase their dividend yield.
Among exchange-traded funds (ETFs) should pay attention to Vanguard Total World Stockportfolio which includes 8109 securities of companies from developed and developing countries. In the sectoral breakdown is quite popular Fund companies iShares Nasdaq Biotechnology — the industry may go through a second Renaissance on the background of aging population in developed countries. To earn dividends allow paper funds SPDR S&P Dividend and Vanguard High Dividend Yield. There are quite “local” ideas, such as investments in the field of artificial intelligence, but these market sectors require careful study, based on analysis of fundamental factors.