Stock Market has Potential to Shock Skeptical Investors

The U.S stock market is witnessing an increase in gains for the current year. However, strategists remain unfazed and expect only a marginal rise by the end of the year.

Gain in the stock market

S&P 500 has seen a 5.8% rise in the first quarter to 2,368, the best performance the company has seen since the fourth quarter of 2013. According to a survey held by CNBC in February, 16 strategists stated the average gain would be just 1.6%. In March, 4 strategists changed their minds after seeing the change in the stock market and raised the average gain. Overall, S&P has seen a gain of 10.7% since Donald Trump came to power.

Thomson Reuters stated the earnings and revenue are expected to grow by 10.4% and 7.1% respectively. Dow is observing a quarterly gain of 4.9% that brings it’s up to 20,728 while NASDAQ has reached 5,914, an incredible gain of 9.9%. The trading in the market has been healthy and every time S&P reaches a new high, the stocks continue to display better scope. Tobias Levkovich, Citigroup chief U.S equities strategist set the bar for S&P at 2,425, the average in the survey held by CNBC.

Growth not up to the mark

According to the chief market analyst at The Lindsey Group, Peter Boockvar, the failure by the White House and the Congress to lead health care to a vote is the reason for the drop in bullishness. A survey by ‘Investors Intelligence’ revealed that the number of Bulls dropped to 49.5 from a peak of 63.1, an acute 7.2 point drop.

The investors are concerned about the inactivity in Washington and European elections and occupied about the direction in which short-term money is flowing.  Lekovich said that for money managers, a rally of 10% in the current market will be more distressing than a correction by 10% as they are not prepared for the market increasing its value. He stated that if the rally was because of Donald Trump, the U.S market should have been better than any other market in the world. He also said that investing in emerging and European markets will fare better than the investments in the U.S market.

On the other hand, Lekovich said that the tax reform would be welcomed by the market. If the Fed tightens the policy or if there are geopolitical unknowns, the rally can be hampered.

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