US Stock Market 2016
After the completion of seasonal reports and publishing statistical information on unemployment, US stock market 2016 showed strong emotion. They were caused by the inertia after a long period of rapid growth and high expectations from the Central Bank.
But the Outlook for US stocks shows the approaching stabilization and containment of the stock market. Now US stocks growth exceeds the earnings growth of companies included in the Dow Jones and S&P 500, but a rate increase by the Fed will lead to significant changes.
The financial reports and statistics publication about the unemployment rate came in better than anticipated. Therefore, the probability of rising interest rates on overnight loans rose.
The world stock market there has a tendency of maintaining the traders and investors by Central banks, both with keeping interest rates low. So the first increase for the last 9 years will not be critical. Analysts say the change is not more than 2%, which is considered a weak increase in historical context.
Analysts agree that it is prematurely to speak about the decline in growth by 20% or more. But such strong growth that was observed in the last 6 years will be gone. Rising interest rates will improve P/E ratio, but will lead to slower growth.
According to Invite Bahuguna, chief portfolio Manager Fund Columbia Threadneedle Investments, the activity of market participants has increased dramatically, but this situation will not last long. Management of the Fund has already sold a portion of the US shares.
Since the end of August 2015, the US stock market 2016 has grown steadily. The value of the securities has almost reached the May level, when the Dow Jones index was observed during the peak.
After the publication of statements it exceeded the August low at 14% and the S&P 500 is 23 times bigger than the profits of the member companies over the last year. This P/E ratio exceeds the average mark of 15.5, and even the September peak - 20.
Strategist of Goldman Sachs Group David Kostin forecasts:
• The total return of the S&P 500 5% on average for the next 10 years;
• Including 2% from dividends;
• The remaining 3% for the price increase.
David Costin and John Bogle (founder of Vanguard Group) agree that the S&P 500 will fall first, and then rise at 4-5%, without taking inflation and costs into consideration. Now the US shares price is above average, but rising interest rates will make credit funds less available. Then prices will drop, and issuers profit will begin to grow faster.
Such an analyst of the US stock market 2016 creates a gloomy impression of the prospects of investments.
Most likely, in first half of 2016, the US shares will almost stop growing.
Despite the expected deterioration in market conditions, after its turn, we should expect positive dynamics. Market commentators predict a recovery in investment profit by 8.3% in the coming year.
It is very difficult to make an accurate prediction for the US stocks.