Fuguo Bank warns: US stock market rally "coming to an end" in the short term!
Analysts at Fuguo Bank warn that the US stock market may not see significant gains in the short term, believing that market valuations are reasonable but facing three major obstacles. The S&P 500 Index may encounter resistance near historical highs, despite investors' growing confidence in an economic soft landing. Factors such as geopolitical tensions, concerns about economic recession, and weakening momentum in AI stocks are increasing market uncertainty. Investors should consider adjusting their portfolios, focusing on emerging markets and other less favored sectors
Analysts at Fuguo Bank stated that in the coming months, US stocks are unlikely to significantly rise, and in their view, the market is "currently fairly valued."
This is because three major resistances will limit the rise of the S&P 500 Index. The S&P 500 Index may encounter resistance near the historical high of 5670 points set earlier in the summer.
With investors gaining confidence in a soft landing for the US economy and preparing for the ambitious rate cuts by the Federal Reserve, US stocks continued to rise in August.
However, the market still faces many uncertainties. The bank pointed out concerns about geopolitical tensions in the Middle East, doubts about whether the economy can avoid a recession, and worries about the momentum loss in AI stocks.
Additionally, US stocks also need to navigate an election year, historically meaning more volatility. Investors are assessing an uncertain political landscape, with recent polls showing presidential candidates Harris and Trump neck and neck in support.
Strategists stated in a report on Monday, "While we believe the S&P 500 Index is still in an upward trend, it now finds itself facing key resistance at historical highs. For these reasons, we believe the S&P 500 Index is unlikely to reach meaningful new highs in the coming months."
Although US stocks may not soar to new record highs in the short term, for investors, adjusting and reallocating their portfolios to "particularly unfavorable areas" - namely those market sectors that are not favored by the market, have the opportunity to achieve significant upside potential in the coming years.
This includes emerging markets, non-essential consumer goods in the US, essential consumer goods, utilities, and the real estate industry.
Since the beginning of the year, investor enthusiasm for US stocks has cooled, with the high expectations for AI and the Fed's easing monetary policy driving the market to continuously set new historical highs. Since then, growth concerns have overshadowed the excitement over rate cuts, and doubts about the sustainability of the AI rally have dampened the optimism in tech stocks.
In the latest AAII investor sentiment survey, about 45% of investors expressed optimism about US stocks in the next six months, down from around 51% about a month ago