Market Volatility Trading Decisions
The threatening trade war and other factors have made markets volatile and uncertain, so here’s how to negotiate your way through market volatility.
One of the challenges in stock trading and investing is dealing with uncertainty and market volatility, of the kind we’re facing now. Indeed, facing those storms can make you a more experienced and successful trader, but as a novice it can be overwhelming. A trade war, or rumors of a trade war of the kind we’re hearing now between the US and China has added to the already volatile situation of the markets. This can be quite disillusioning for investors and traders. Some expert insight can be pretty useful.
Trade War Fears Have Affected Stocks of Exporting Companies
The fears regarding a potential trade war have sent shockwaves across the market in spite of parts of the market holding on to the hope that negotiations would succeed in terms being agreed by both countries. Companies such as Boeing ($BA), which were on a roll in 2017, have seen their stocks sink. In this backdrop, some analysts recommend investing in stocks of companies that have significant domestic sales. In situations when two countries are in a trade tiff, companies situated in each of these countries but selling products to the other country get affected with uncertainty. But companies with significant domestic markets would not be affected much from international trade tensions.
No wonder then, that we saw many of the major exporters in the US witnessing an early fall of their stock prices on Wednesday, when China announced its plans for retaliatory tariffs on 106 American products, among which are included products by industrial stocks in the aerospace and automobile industries. Trade wars only cause a slowing down of global growth and profits. But Goldman Sachs’ ($GS) Peter Oppenheimer believes that stocks of US companies operating domestically could stand to benefit.
Suggestions by Expert Analyst
Goldman Sachs’ list contains consumer companies such as Dollar General Corp. ($DG) and CVS Health Corp. ($CVS), telecommunications company Verizon ($VZ), railroad company CSX ($CSX), real estate business Public Storage ($PSA), the bank Wells Fargo ($WFC) and the financial services tech firm Intuit ($INTU).
Not as Bad as It Seems from the Outside
Oppenheimer also believes that there aren’t any indications of a recession happening soon even when the market slips into correction mode. The experienced analyst reckons that the current high corporate profitability could help hedge against a big crash. The primary factor for a bear market to prolong is the fear that profits could fall or a recession could happen. Oppenheimer does not consider any major risk of these factors occurring. Since the expectations of inflation or interest rates have not risen in a significant manner, he does not see the need for investors to worry about equity prices sinking for a prolonged period of time.
That’s certainly a piece of much needed good news, in a situation where the bull market has made way for a period of volatility caused by various factors not least of which is the looming threat of a ruthless trade war. Other factors include the increasing pressure of regulations on tech and the other industries that are doing well. There are also concerns regarding inflation and the monetary policy getting tightened. These factors plus the overall market uncertainty make it quite confusing for novice stock traders and investors. That’s where the opinion of experienced analysts such as Oppenheimer can help.
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