What Next for Stock Market?
In recent days we have regularly been hearing news of the impending recession and with that our stock market has fallen by almost 1000 points in the last month. We have been hearing about the bond yield inversion in the US which is giving global investors panic about what stands in the future of the world’s biggest economy. But there are reasons not to worry. Other economic data has been positive, and no one has a good idea why an inverted curve tends to predate a recession. It could be because long-term bonds reveal investors’ expectations about future growth and lower rates mean more pessimism.
The result season has come to an end and majority of the companies delivered a disappointing quarter. With the slowdown looming on the economy, the companies could do very little to revive this quarter and are now mostly dependent on the government to boost sentiment and bring about a change at the grassroot level.
Markets are likely to receive some boost this week due to government's impetus unless the trade war issue intensifies further.
Hence, the focus will now shift to earnings recovery and investors will also take cues from global developments. Investors would keep a close watch on progress on US-China trade talks, movement of crude oil price and rupee/dollar.
The market is likely to receive some booster next week if the government comes out with a booster package and the trade war does not intensify further. Risk-taking investors can look at quality companies for the time being, but staying on the side lines would still be a better option.
What should we do now?
Our focus should mostly be on the long term and we should keep adding good quality stocks at good valuation. Every dip in the market must be considered as an opportunity. Also focus on rebalancing your portfolio by asset allocation. Ignore short term noises and stick with your long term goals.