Stock market: “US stocks have potential, financials and health should be prioritized”


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In the stock market, the US stock market saw a decline in April, but from the perspective of technical analysis, the uptrend remains intact. According to Jay Woods, chief strategist at Freedom Capital Markets (Freedom24), in an interview with Capital, the financial and healthcare sectors are among those they prefer.

US stocks have shown excellent health since hitting their all-time low last October, with an impressive 27% gain over the period, despite a significant drop in the stock market in April. However, apart from recent fresh hopes of a key rate cut by the Fed, the trajectory of long-term rates remains uncertain, as does US economic growth, while activity in the service sector has recently stalled. In addition to these uncertainties, speaking to Capital, Jay Woods, chief strategist at Freedom Capital Markets (Freedom Holding Corporation, active in France through online broker Freedom24), remains generally optimistic about the outlook for the U.S. stock market.

The expert believes that the liquidation movement that occurred in April in the US stock market represents only “normal retracement (the stock market has taken a breather, it usually corrects downwards after a significant increase in previous months, editor’s note)” because we are only down 5 or 6% from the peak. These are normal corrections that occur on average three times a year. Today, “we are in the process of rising above a major moving average (a price action smoothing tool that can act as a graphical support or barrier, depending on technical analysisnote editors) and we try to test the old peaks,” notes Jay Woods.

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According to technical analysis, the upward trend of the US stock market remains intact

We’re simply seeing a pause in the stock market within the recovery movement seen in recent quarters, and as I said, lateral movement (generally a horizontal, flat trend, ed. note) is a direction. It is a constructive movement (encouraging, which foreshadows the future growth of shares, editor’s note)», judges the expert. Especially since in terms of technical analysis (the analysis of quotation charts and mathematical indicators to measure the trajectory considered most likely for the stock market), there was no major technical damage to the major US stock indexes (Nasdaq, S&P 500 and Dow Jones Industrial Average).

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In the stock market, the recent concerns of stock investors need to be taken into account

While it’s not surprising that investors get worried when the stock market falls, an expert says it’s important to put things into perspective. “We assume almost a 30% increase in US stocks. And 10-year interest rates are at 4.5-4.7%, levels seen (last November, editor’s note) when the S&P 500 was trading at 4,600 points (compared to around 5,200 points today, editor’s note), so the market was able to digest a steady rise in 10-year rates as Treasury yields rose», notes the expert. In the event of a quick recovery in concerns, we see a sharp rise in the VIX (US Equity Volatility Index), which recently hit 20 and is now back below 13.”Concerns have therefore calmed down and it is true that they can be irrational when we observe peaks, but the market has absorbed this move well,” notes Jay Woods.

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In the stock market, US financials and healthcare stocks should be favored, but risk discretionary consumption will continue to disappoint

However, in the current situation (uncertainty about rates, geopolitical tensions, etc.), it is better to be selective in the stock market and focus on sectors of activity that should a priori to be the noblest. On the stock market, Jay Woods says:continue to observe the expansion of the leading position in individual sectors (i.e. the sectors of activity that are most on the rise, editor’s note)“. Currently, the commodities and utilities sectors are doing very well – two defensive sectors.”This reflects the sectoral rotation (in the stock market, the sectors of activity that lead the way, that are the most efficient, are no longer the same as before, editor’s note) of the stock market – and rotation is a good thing. To quote Ralph Acampora (renowned asset manager and technical analyst, editor’s note), sector rotation is an essential element of a bull stock market.“, argues the expert. This is a positive element for the overall health of the markets.

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According to Jay Woods, an investor in US stocks should be particularly interested in the healthcare and financial sectors, which are a priori ready to continue their growth. Global exposure to technology stocks remains essential because “it is in this sector that we find growth stocks”, says the strategist. However, discretionary spending (the consumption of non-essential goods) is a bit of a concern, with stocks like Tesla and Starbucks coming under considerable pressure as consumers become selective in their purchases. “This change in consumer behavior will affect discretionary consumption. This is why I continue to hold core stocks and utilities, defensively. The healthcare and financial sectors should continue to recover in the second half of the year.», Judge Jay Woods.

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Which sectors of the stock market to favor if Trump wins over Biden in November? And if not?

When it comes to the question of the US presidential cycle, historically, the stock market “is typically strong during the second half of the fourth year of a first presidential term (as in 2024 with Joe Biden), with the fourth quarter being the strongest of all», points out Jay Woods, who believes that this year “will continue on this path“. We tend to see that industrial stocks and the materials sector have done well during the presidential cycle, and then as we approach the election, specific sectors favor the candidate who is likely to win the election, explains l ‘expert.

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If Donald Trump wins, he reckons defense-related stocks will rise, while if Joe Biden wins, industrial stocks will continue to rally. “Overall, the election will be a very noisy event, and stock investors should tune out the noise knowing that markets tend to historically do well once we have certainty about the outcome of the election. I think it will be the same this year», Judge Jay Woods.

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