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After A Tumultuous Year, What Can We Expect In The Stock Market In The Fourth Quarter?

For the professional online traders and market mavens of Wall Street and beyond, the market may go both ways in the coming months. However, some investors believe they’ll earn more.

Many investors agree that the “double-digit returns of 2019 will not be repeated”

There was a major sell-off in early September following a wild stretch that saw stocks surge from their worst 3-day slump. The sharp sell-off saw the S&P 500 lose 6.7%, shortly after reaching a record high. However, the index later bounced back and gained 2%. 

Nonetheless, bears were back shortly after, and investors are waiting to see whether the sell-off will lead to a bullish market or the complete opposite. 

What Drove the Stock Highs?

The ride from this point could get bumpier following the massive sell-off that took place on September 10.  The market made a shocking turn around to all-time highs in August. This bullish move was propelled by the trillions of dollars stimulus aid given to Big Tech. 

Additionally, the S&P 500 recovered from its 34% loss as the country hoped for a COVID-19 vaccine. 

 The stock market recorded new highs despite the US economy dropping sharply. However, corporates recorded some profits, and this drove the market upwards. 

High flying tech stocks such as Apple, Google parent Alphabet, and Microsoft were the engines of this year’s rally. The stocks managed to succeed despite the lockdown measures put in place to contain the virus. 

Potential Future Risks

The stock market notched its best in August after more than 3 decades. However, investors think that we should expect much worse in the coming months. 

However, one key reason that stocks could rise is because of the hope for a vaccine to end the pandemic. But any setback regarding the development of a vaccine could hurt the stock market’s rebound. 

The U.S presidential election is less than 2 months away, and this has brought different sentiments and reactions across online trading markets. Other factors that are a concern include the renewed trading tensions with China. 

American Flag

Many investors hope to benefit from the economic stimulus package set to be released. They hope this will boost the economy, and also help the stock market recover. 

The recent bearish market intensified speculations that the market shakeout is not over.  According to Jonathan Bell, the chief investment officer at Stanhope Capital, “we are certainly in bubble territory”

Bell further stated that investors had many good reasons to own stocks such as Facebook, Microsoft, and Alphabet. One of the main reasons is their combined performance despite the pandemic. 

Stock Market Predictions

According to the Bank of America, the U.S China trade war and the approaching presidential elections remain the core of the company’s forecasts. The company is relatively optimistic, and expects more yields. 

Amundi Asset Management stated that investors should not focus on the global recession, and instead focus on adjusting their portfolios to fit a de-globalization trend. The company also advised investors to prepare for a long credit cycle, which will see an increase in liquidity risks. 

Barclays strongly believes in a positive market. This will see significant returns from major asset classes. 

Goldman Sachs, the easing by the central bank, saw risky assets benefit. However, the situation is different now as growth is expected to drive returns. The firm expects relatively better growth, and thus decent risky reruns. However, the firm warns of more risks, and more challenging valuations, meaning the possibility of bulls is limited.

JPMorgan Chase & Co believe that returns will be worse than 2019. However, the company expects better returns towards the end of 2020, which will make 2020 the proverbial year of two halves. 

How to Prepare 

 Now that you have an idea of what could happen, you can plan it today. Below is a three-step game plan you can follow to avoid losing money.

  • Diversify your portfolio- this is the smoothest path through a tumultuous market. 
  • Maintain your risk appetite- you may want to take more risk but it’s best to save it for later. 
  • Understand your portfolio- this is how many big investors make profits. 

Although the stock market has posted positive gains in the last 2 months, investors are skeptical about the future. Some of the factors being considered to include the COVID-19 vaccine, the U.S presidential elections, and the US/China trade war. Follow the strategies recommended to avoid huge losses and survive these tumultuous times. 

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After A Tumultuous Year, What Can We Expect In The Stock Market In The Fourth Quarter?

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