This year, there has been plenty of talk about another stock market crash. A lot of experts have been saying that stocks could return to their October 2022 lows.
For a while there, I was in the bearish camp myself. However, recently, Iâve become far more bullish in terms of the outlook for global equity markets.
With that in mind, here are five reasons I think shares can keep rising in the second half of 2023.
Inflation is coming down
Letâs start with inflation. This is really starting to come down now (in most countries). For example, in the US, CPI inflation came in at 3% for June â the lowest level since March 2021.
This has implications for interest rates, which have put pressure on shares recently. Now that inflation is lower, weâre less likely to see aggressive interest rate hikes from central banks.
The consumer is still spending
Next up, we have consumer spending. This is robust.
I saw this first hand when I was on holiday in France last week. The country was literally swarming with tourists and people were spending money feverishly (I think Mastercard and Visa shares are good plays on travel spending).
One thing that could be helping here is higher interest rates. We often hear about how high rates are hurting some people. What we donât hear so much about is all the people (like the Baby Boomers) who have a lot of cash savings and are now earning tons of interest.
Robust consumer spending could help major economies avoid recessions.
Many stocks are cheap
Turning to the stock market itself, many shares remain cheap.
The global equity market rally in the first half of the year was largely driven by a handful of tech stocks. There are a lot of stocks that havenât rallied in 2023, including the likes of Diageo, AstraZeneca, PayPal, and Nike.
This means thereâs still scope for gains.
Itâs worth noting that weâve seen an increase in market âbreadthâ recently, with more stocks starting to rally. This is bullish, to my mind.
Thereâs money to come into the market
And thereâs still a lot of money that could come into the market from here.
At the beginning of 2023, many investors â big and small â were sitting in cash due to the high level of economic uncertainty. Plenty of this money remains on the sidelines (in late May, there was about $6trn sitting in US money market funds).
Now that stocks are rising, some of this capital may find its way into the market, driving share prices higher.
Good odds
Finally, history shows that thereâs a good chance the rally will continue.
Research from Tom Lee at Fundstrat shows that on the 22 occasions since 1950 when the S&P 500 index has finished the first half of the year up more than 10%, the median return for the second half was 8%, with a 82% win/loss ratio.
I like those stats.
I could be wrong
Of course, the stock market is notoriously unpredictable in the short term. And there are plenty of things that could result in a downturn in the second half of 2023.
These include:
Weaker-than-expected earnings
Higher-than-expected inflation and/or interest rate increases
A major downturn in the economy and/or consumer spending
A âblack swanâ event
Iâm optimistic though. Iâm betting that shares are going to continue rising.
The post Forget a stock market crash! Here are 5 reasons shares can keep rising in 2023 appeared first on The Motley Fool UK.
Our analysis has uncovered an incredible value play!
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
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setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
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})()
More reading
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Are Oxford Nanopore shares set to soar?
5 reasons why dividend shares can be good for our wealth
Should investors buy AstraZeneca shares after a 16% pullback?
One dirt cheap dividend stock Iâm desperate to buy and itâs not Persimmon or VodafoneÂ
Edward Sheldon has positions in Diageo Plc, Mastercard, Nike, PayPal, and Visa. The Motley Fool UK has recommended Diageo Plc, Mastercard, Nike, and PayPal. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
This year, there has been plenty of talk about another stock market crash. A lot of experts have been saying that stocks could return to their October 2022 lows.
For a while there, I was in the bearish camp myself. However, recently, Iâve become far more bullish in terms of the outlook for global equity markets.
With that in mind, here are five reasons I think shares can keep rising in the second half of 2023.
Inflation is coming down
Letâs start with inflation. This is really starting to come down now (in most countries). For example, in the US, CPI inflation came in at 3% for June â the lowest level since March 2021.
This has implications for interest rates, which have put pressure on shares recently. Now that inflation is lower, weâre less likely to see aggressive interest rate hikes from central banks.
The consumer is still spending
Next up, we have consumer spending. This is robust.
I saw this first hand when I was on holiday in France last week. The country was literally swarming with tourists and people were spending money feverishly (I think Mastercard and Visa shares are good plays on travel spending).
One thing that could be helping here is higher interest rates. We often hear about how high rates are hurting some people. What we donât hear so much about is all the people (like the Baby Boomers) who have a lot of cash savings and are now earning tons of interest.
Robust consumer spending could help major economies avoid recessions.
Many stocks are cheap
Turning to the stock market itself, many shares remain cheap.
The global equity market rally in the first half of the year was largely driven by a handful of tech stocks. There are a lot of stocks that havenât rallied in 2023, including the likes of Diageo, AstraZeneca, PayPal, and Nike.
This means thereâs still scope for gains.
Itâs worth noting that weâve seen an increase in market âbreadthâ recently, with more stocks starting to rally. This is bullish, to my mind.
Thereâs money to come into the market
And thereâs still a lot of money that could come into the market from here.
At the beginning of 2023, many investors â big and small â were sitting in cash due to the high level of economic uncertainty. Plenty of this money remains on the sidelines (in late May, there was about $6trn sitting in US money market funds).
Now that stocks are rising, some of this capital may find its way into the market, driving share prices higher.
Good odds
Finally, history shows that thereâs a good chance the rally will continue.
Research from Tom Lee at Fundstrat shows that on the 22 occasions since 1950 when the S&P 500 index has finished the first half of the year up more than 10%, the median return for the second half was 8%, with a 82% win/loss ratio.
I like those stats.
I could be wrong
Of course, the stock market is notoriously unpredictable in the short term. And there are plenty of things that could result in a downturn in the second half of 2023.
These include:
Weaker-than-expected earnings
Higher-than-expected inflation and/or interest rate increases
A major downturn in the economy and/or consumer spending
A âblack swanâ event
Iâm optimistic though. Iâm betting that shares are going to continue rising.
The post Forget a stock market crash! Here are 5 reasons shares can keep rising in 2023 appeared first on The Motley Fool UK.
Our analysis has uncovered an incredible value play!
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
3 stocks to buy before it’s too late!
Are Oxford Nanopore shares set to soar?
5 reasons why dividend shares can be good for our wealth
Should investors buy AstraZeneca shares after a 16% pullback?
One dirt cheap dividend stock Iâm desperate to buy and itâs not Persimmon or VodafoneÂ
Edward Sheldon has positions in Diageo Plc, Mastercard, Nike, PayPal, and Visa. The Motley Fool UK has recommended Diageo Plc, Mastercard, Nike, and PayPal. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
