According to the news report by MarketWatch, one of the most widely followed financial experts in the world, the chief investment strategist of Raymond James, Jeffrey Saut recently stated that his analysis shows that the US stock market will finish 2018 stronger.
The financial strategist make two very key points to support his theory. First, the US stock market made a very important positive move – one that hasn’t happened since 1958.
According to Saut, historically, during mid-term election years, stocks tend to become iffy in August, but rally as the actual elections draw nearer. He also said that data tracked over the last few decades shows that when stocks are up in April, May, June and July during mid-term election years and the markets have crossed the iffy-ness August in that year, then stocks finish stronger for the year. He said that these conditions were met only twice in the past, once in 1954 and then again in 1958.
Despite quite a rocky start, the month of July ended with stocks showing solid gains, pushing the S&P 500 Index’s gains to four straight months. The S&P 500 showed gains of 0.3% in April, another 2.2% increase in May, and then one more set of gains in June of 0.5%. Finally, in July, the S&P 500 saw a much larger gain of 3.6%.
According to historical data from the Dow Jones Market, the S&P 500 had gained 45% in 1954 and in 1958 the large-cap index had grown by 38%. This year, the S&P 500’s gains have been 6.2% year-to-date.
The second thing Saut stated said was that the chances of the democrats winning the mid-term elections were slim. In fact, the party may even fall short in the House in the second half of the year. According to Saut, their contacts at the capital of the country are saying that the House is up in the air, despite many saying that Democrats are going to have a clean sweep.
Saut wasn’t the only one who was bullish about this year’s stock market performance. According to an analyst from Bespoke Investment Group, Paul Hickey, even without the extra push from political developments, whenever stocks have finished higher between the months of April and July, stocks have always closed higher for the year too.
However, there is warning that investors should not get too comfortable with the fact that this year is going to have a good ending. Considering the large number of unresolved issues associated with Trump’s ongoing trade war with China, it’s not a good idea to take things for granted.
Additionally, increased turbulence in the stock market is expected this August, since it is considered the weakest month in the year. This may, in fact, cause the market’s energy to turn neutral soon, according to Saut.
Another things that Saut pointed out was that the market not collapsing after Facebook’s meltdown shows that investors exiting the tech sector’s stocks such as Twitter, Amazon.com and Alphabet’s Google are now re-routing their money into other sectors of the market.
All the major indices in the market have started this month on a positive note. The S&P 500 has now bagged 5 straight weeks of wins. The Dow Jones Industrial Average went up by 0.1% for the week, thanks in part to the massive rally by Apple Inc. when it became the first American company to hit the $1 trillion valuation mark. The Nasdaq Composite Index also went up by 1% for the week.
At the end of the day, it remains to be seen whether Saut’s bullish predictions about the US stock market will be true.