Barclays: what processes affect the American stock market
The S&P 500 Index continues to hit record highs, which has traders increasingly concerned about the way forward. Despite the fact that the overall situation is quite optimistic, the American stock market is still not fully recovered from the pandemic. Analysts from Barclays proposed their model of activity, which will not allow falling into panic and relatively calmly surviving the difficult time.
Experts advise to make an investment portfolio with an emphasis on stocks. Despite the fact that over the past year, the multiples of these securities increased significantly, but the credit for this lies mostly in the good indicators of profit recovery. At the same time investors are concerned about too high estimates of the market growth. They are afraid of another bubble, which may burst at any moment. However, experts of Barclays, that in fact, correspond to the intensive growth of earnings, which creates the impression of inflated expectations.
According to a consensus forecast that was published last year, companies that are part of the S&P 500 Index will not reach pre-pandemic earnings numbers. Such predictions did not materialize, and as early as the end of 2020, results were recorded that exceeded the 2019 numbers. That’s why it seems that earnings estimates look overstated, but they are based on intense earnings growth. And if we consider the situation in view of the previous dynamics, the positive sentiment is quite logical after the crisis.As for the near-term outlook, Barclays experts note a rather weak potential for development. At the end of the year, the S&P index is likely to be at 4 thousand points, which indicates a growth of about 1%. The optimistic scenario suggests an increase to 4,600 points.
In addition, analysts note that the attractiveness of stocks of U.S. companies looks much higher against the background of securities of companies from other countries, where the recovery processes are slower.
It should be taken into account that last year and this year, the forecasts for the market were made based on the situation with the incidence rate. And when the number of COVID-19 cases increased in the U.S., the economic forecasts for European countries improved, and vice versa.
Even though stocks will continue to rise in the short term, we should not forget about a possible pullback. The market is still volatile and investors are rebalancing at this time of year, which also affects the situation. Traders sell some shares to buy bonds, and this is quite normal market dynamics.