With U.S. stocks hitting six new-record highs in 2020’s first 12 trading days, investors holding $1 million or more in stocks are more confident in the market than a month ago.
In 2019’s fourth quarter, many investors feared a market drop or recession; now a survey by E-Trade Financial found that 76 percent of these investors rate the U.S. stock market as strong. The survey also recorded a 16-percent increase in the number of investors who expect the Dow to rise by as much as 5 percent by April.
Investors take confidence from an easing in the U.S.-China trade war, a tight labor market, and what they see as continuing strength in the consumer economy. Because this is an election year, analysts expect the Fed not to spring any surprises regarding interest rates.
Earnings growth and overall business performance, however, didn’t improve in 2019. Bullish investors are largely staying with well-known companies that pay dividends.
According to Jeremy Seigel, a Wharton finance professor, the market is becoming increasingly vulnerable to a 10-percent correction. “Any little thing could trip things up,” he says.
TREND FORECAST: While a “Any little thing could trip things up” and cause a 10-percent correction, a very “big thing,” such as war in the Middle East, cyber attacks, spiking oil prices, etc., will drag the overvalued markets deep in to 20-percent (or more) bear territory.
