2024-01-24 03:47:00
Last week, the peak of the S&P 500 was added to the highs of the Nasdaq technological index, and yesterday it was the turn of the Dow Jones, which broke the barrier of 38,000 points.
The widespread idea that the US central bank (Fed) will lower its interest rate at least six times this year, which would favor the stock markets since lower financial costs for companies would increase their profit margins, as well as the prospect that the country’s economy will avoid a recession and will only slow down, increased the appetite for investments in the stock market.
The reverberations of the New York stock market milestones reach the local market, in which investors, like their American peers, wonder if they are the basis on which prospects for more gains in stocks are affirmed or the prelude to a Wall advance. Street from now on more limited, and even the amber zone for future declines.
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What drove the New York Stock Exchange?
Last year was a resounding one for the largest stock market in the world, as the S&P 500 rose 26.3% and the Nasdaq, 55%, both catapulted by the rise in the shares of technology companies, in turn driven by the emergence of generative artificial intelligence. in 2023.
These accelerated increases reinforce the arguments of analysts who consider that US stocks are now expensive, thus creating uncertainty regarding their course in 2024.
Such is the perspective of Fernando García, portfolio manager of Kubus Kapital, who details that the perception prevails among investors that inflation in the US is no longer a problem and that its economy is in a clear soft landing (slowdown). with no recession in sight, a favorable scenario for stocks.
Wall Street is experiencing stock euphoria.
However, expectations for hiring workers in that country are falling rapidly, so in two or three months there would be a severe contraction in employment that will affect demand and, therefore, the results of American companies, he warns.
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Could the New York stock market fall in the short term?
“The profit expectations of US companies that are being incorporated into stock prices would not seem reasonable. There may be a shake-up in that market, perhaps a 10% drop, even though there has been bull market sentiment since October. It would not be the time to buy shares, because that market would be expensive,” he maintains.
“The consensus is expecting a fall in the S&P 500,” he points out and estimates that investment managers, such as mutual and pension funds, among other institutions, will choose to maintain but not increase their positions (holdings) of shares, a bias that they will also follow. retailers (small investors).
This caution, following the New York stock market reached historical highs, will continue for as long as the correction (retreat in stock prices) lasts, says García. “That caution, in turn, will accentuate the decline,” he adds.
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Why should investors hold US stocks in their long-term portfolios?
However, it is very important for investors to keep US stocks in their portfolio for the long term, says Marco Contreras, head of analysis at Kallpa SAB.
The New York market has reached maximum levels following two years, but it has just recovered from the losses it accumulated in that period, so its rebound does not imply a bubble, he asserts.
In 2000, during the dotcom crisis, the PER (which reflects how many times the earnings per share are included in its price) was 30, but now it is 22, he argues.
From that perspective, it indicates that local investors will keep their US stocks in their portfolios, “although with risks going forward.”
“There may be some caution that is short-term, but normally (institutional investors and fund managers) maintain positions in stocks. Only if there was something catastrophic that justified leaving, would they reduce their positions in this market,” he emphasizes.
As for investors who do not have US stocks today, Contreras mentions that a suitable time to enter that market would be when it falls between 5% and 10% from its current levels.
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