US stocks were in the red on Friday, following a tumultuous Thursday in which tech companies helped the Nasdaq profit as the Dow and S&P 500 tumbled.
It is time to reassess the market landscape.
Our call of the day, from the team of Chief Investment Officer Mark Haefele at UBS UBS,
Global Wealth Management urges investors to consider six types of stocks.
The Swiss bank’s group identifies two main trends going forward: gains for Asian markets, as COVID-19 vaccines help local stocks; and a drop in inflation from currently high levels.
These dynamics require investors to find new opportunities. While UBS maintains a positive outlook on global equities, the bank has six ideas for selecting stocks.
One is to diversify technology positions away from megacaps in the US and Asia like Apple AAPL,
and Tencent 700,
UBS sees “limited short-term catalysts” for these stocks. Instead, Haefele’s group identified opportunities in digital leaders in Europe; small and medium-sized companies exposed to trends such as 5G, fintech, greentech and healthtech; and digital subscription businesses.
Another is to buy energy shares, despite the fact that this sector has risen almost 50% so far this year. It is now only at pre-pandemic levels, UBS said, while the S&P 500 index is 25% higher than its peak in February 2020. Rising oil prices, which the bank predicts will come, should boost these stocks.
The third idea is to invest in finance. S&P 500 financial stocks, like banks, have rebounded 9% since early March, and macroeconomic trends, like higher yields, pave the way for more gains, UBS said.
Investors should also favor US small and mid-cap stocks – that is, companies with a market capitalization of less than $ 10 billion but greater than $ 300 million. “On a price-to-earnings basis, valuations of US small and mid-caps are close to 20-year lows relative to large caps, despite the likelihood that growth of the earnings of the smaller companies will exceed the earnings of the large caps until at least 2022. ” Haefele’s team said.
But the biggest opportunities, according to UBS, are in Asia.
Chinese stocks have faced setbacks in recent months, with the MSCI China index falling into bearish territory in May amid higher US yields and antitrust measures against Chinese tech companies. So buy the fall, said the Swiss bank.
For its sixth, UBS also predicts gains in Japan, which is geared towards the global recovery. The group expects 40% growth in earnings per share for the MSCI Japan index this year, which is good news for Japanese stocks.
It should be noted that there are risks to a global rally, UBS said. More persistent inflation, slower growth, geopolitical tensions and a resurgence of COVID-19 pose a threat to another rally in equities.
US President Joe Biden signed the law into law on the last US federal holiday on Thursday, which commemorates the end of slavery with the 16th National Independence Day on June 19. On that day in 1865, federal troops marched on Galveston, Texas, two months after the end of the Civil War, to seize control of the state and free the last of the enslaved Americans. Read more about June 19th here.
A record $ 756 billion in cash flowed into the US Federal Reserve’s “reverse buyback” facility Thursday after a sale of securities to money market funds and the nation’s largest banks. In reverse repurchase operations, the Fed sells securities for cash and agrees to buy them back for a higher price at a later date, temporarily. reduce the amount of reserve balances On Wednesday, the Fed announced that it was increasing the reverse repurchase rate from 0% to 0.05%.
North Korea’s totalitarian leader, Kim Jong Un, ordered his government to prepare for a further confrontation with the United States under Biden, according to state media on Friday. The news came days after the United States urged the state to abandon its nuclear program.
Investment banking giant JPMorgan Chase JPM,
bought one of the UK’s most popular online wealth managers, Nutmeg, for an undisclosed sum. The move paves the way for an expansion of Chase’s online-only retail banking services in the UK, meaning the US bank will compete directly with companies like Barclays and HSBC.
US DJIA stocks,
They were in the red at noon as investors continue to absorb the Fed’s shifting stance on rates and inflation. European equities SXXP,
similarly fell across the board, while Asian stocks NIK,
The most mixed day ended.
Our chart of the day, courtesy of Wolf Richter at Wolf Street Financial Blog, shows the massive rally in cash at the Fed following Thursday’s reverse buyback sale. Drains more than six months of [quantitative easing] out of the market, ”Richter said.
An amphibious car for less than a Tesla? Egyptian inventors say They’ve made cars that can drive on water priced between $ 19,000 and $ 44,800, depending on specs.
A fish to survive meme populations? The coelacanth – a type of person the size of a person giant fish that has been around since the time of the dinosaurs“It can live for 100 years, a study found.”
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