The US stock economy has been on the upswing for about five years, and that’s a long time- much longer than people are accustomed to- and a lot of investors are getting itchy feet. Experts have been predicting a crash for a long time, and things have been slowly dropping since around the end of 2017. As growth spurts go, this one has outlived expectations, and that’s got a lot of people feeling queasy. But JP Morgan has some unusual advice for skittish investors.
They say the time to pull out of American stocks has not yet arrived. The financial giant’s strategists said recently, “Investors should not extrapolate the U.S. growth slowdown all the way into a hard recession, though, as jobless claims, and labor market more broadly remain well behaved- China has been progressively increasing stimulus.”
U.S. equities have now had their worst year since the crisis of 08, and cautious investors have been made even hotter under the collar due to trade tension with China. The general consensus is that growth has peaked, and there’s not much left to scrape up. S&P 500 companies have seen growth level off at 7.7%. Compared to 2018’s 24%, and that’s not terribly encouraging. After the resulting panicked sell-off, valuations dropped to levels comparable to those of 2013.
Still, the US is not decoupling any faster than anywhere else. That’s because there’s still plenty of reason to hold on- if one looks at the smaller markets. As JPM tells us, there’s going to be a significant pick up toward the end that investors do not want to miss out on.
Samantha Azzarello, JPM’s global market strategist said, “Being late in the cycle does not mean that the end has arrived. The fact is that this ‘late stage’ could be long, sticky and unusually drawn out, just like the broader cycle. Calling it the end would be a fool’s errand and could result in many missed opportunities.”
What many experts are saying is that there is a great deal of unmeasured stability solidifying just under the surface. The key is understanding the minutia of the stocks one has invested in and to make decisions based on that, not on broader considerations.
For example, when it comes to Etherium, the pros at Tricky Finance say, it’s critical to understand the currency. They suggest that basing projections on unrelated markets due to some kind of cyclical orthodoxy would not be very graceful.
Azzarello warns, “Exiting the market too early may leave considerable upside on the table, and late-cycle returns tend to be substantial.”