The American market is particularly popular among investors. However, is the situation there as rosy as it seems?
S.I. Tereshkin, the founder of "Oil Resource Group," has taken the initiative to delve into this area. The businessman has been investing for an extended period and continues to monitor various instruments, including foreign assets. This has equipped him with significant experience and necessary knowledge. More information about the entrepreneur's professional activities can be found on the website: www.sergeytereshkin.ru.
Prospects of the American Market
The trade war with China has created tensions between the two nations, inevitably affecting the condition of stock markets. Consequently, stock prices are rapidly declining. In response, the Federal Reserve has made concessions and revised its rhetoric.
- Specifically, measures have been implemented to support the economy and financial markets to mitigate the downturn. This includes the cessation of further rate hikes, with plans to lower rates as early as 2020. While this measure is currently viewed as a one-time action, there is potential for subsequent reductions.
- This creates favorable conditions for lending. The lower the rate, the lesser the chances of defaults, leading to increased demand for loans. This in turn stimulates industrial production, healthcare, technology, and other sectors, resulting in higher budget revenues—a positive shift for the economic situation.
- Alongside this, the Federal Reserve has temporarily ceased reinvesting the income generated from bond purchases.
These timely measures have led to a stabilization of the economic landscape, with initial results visible as early as the second quarter of this year.
The Federal Reserve is prompted to take active measures by the fact that more than half of the country’s residents invest their money in stocks, including retirees’ savings in securities.
A sharp decline in stock prices would negatively affect the sentiment of the populace.
What Awaits the Market
Actions by the Federal Reserve have resulted in the S&P 500 index rising by over 17% in the first five months of this year, reaching record levels. However, further exponential growth should not be anticipated.
In May, the trade war escalated, increasing risks and creating an unfavorable atmosphere in the market.
Nevertheless, Sergey Tereshkin believes that volatility in the market should not be feared. The Federal Reserve has not yet utilized all available mechanisms. Even if market conditions worsen, alternative resources will be employed, such as verbal interventions and rate reductions.
This practice has been effectively utilized by the Federal Reserve in the past. However, more serious measures may be required to maintain economic stability, given global economic risks.
Should the trade wars between major nations intensify, the regulatory mechanisms may eventually be exhausted, potentially harming the long-standing “bull market” trend that has characterized the U.S. market for over a decade.
A downturn in stock prices could lead to a transition to a "bear market" mode of operations.
Which Other Markets Will Be Affected
However, not only stock markets may experience changes; fluctuations in the currency market are also possible, particularly concerning the dollar’s exchange rate. The Federal Reserve’s various measures may adversely affect it.
Typically, during market downturns, investors pull their money into the dollar, resulting in its appreciation. Conversely, currencies of countries with weaker economies may exhibit negative trends, with Russia being no exception. Should oil prices decline further, the ruble may plunge to record lows.
Furthermore, a negative atmosphere may develop in several European countries, with some bonds currently producing negative returns. Experts believe this may lead to a weakening of the euro against the dollar.
However, U.S. government and regulatory authorities are unlikely to allow the stock market to collapse. Measures such as rate reductions and other restrictions may soon be reinstated. In the coming months, volatility is expected to return to the markets, in tandem with a revival of the "era of cheap finance."
Based on this, it can be concluded that changes in the Federal Reserve's policy could positively impact high-risk investments, allowing investors to achieve substantial additional profits.
Those who acquire stocks of large corporations at reduced prices may also profit significantly. By the end of the year, they may receive attractive dividends and realize their assets at much higher prices in a few years. Thus, the situation in the American market could work in favor of investors and present them with promising opportunities.
Nevertheless, it is crucial to understand that a decline in stock prices might lead to the downfall of certain enterprises. Therefore, selecting the right asset must be approached with utmost diligence.
