The US Stock market has been in rally mode ever since the recovery from the Great Recession began. But, all rallies come to an end, right? The question for traders is will the stock market rally ever stop? Investor’s Business Daily writes that price targets on FANG stocks are going higher as the stocks themselves hit record highs.
Three of four FANG stocks had their price targets raised Friday, following a survey of 70 ad buyers in which 40% said they’ll boost ad spending above previous expectations for the rest of 2018.
Moreover, 27% of ad buyers said they spent more in the first half than anticipated.
The three FANG stocks receiving price-target increases were Facebook (FB), Amazon.com (AMZN), and Google-owner Alphabet (GOOGL). All three are well positioned for the boost in digital advertising.
Traders worry about a trade war between the USA and virtually everyone else, but the economy continues to grow and high tech stocks continue to make money. Will the stock market rally ever stop and, if so, what will be the cause.
An Isolated America
The USA is part of an integrated global economy. According to President Trump, we have been in various trade wars with other nations for years and have been steadily losing. One of the possible scenarios of protracted trade war could be a massive reordering of trade relationships and a shift of global growth away from the USA. America has the largest economy when measured in dollars but not the largest economy when it is measured in purchasing power parity.
An America that cuts itself off from the world would be largely self-sufficient, but not the global power it has been. American companies will need to shift production offshore in order to compete. Our sister site, ProfitableInvestingTips.com, noted this problem in two recent articles, Why Is Harley Davidson Moving Production Out of the USA and Will Boeing Have to Outsource Production in Order to Remain Profitable.
In both cases, the problem is being cut off from foreign markets. The problem for Harley Davison is that the old American icon is struggling and cannot afford to lose more customers. The problem for Boeing is the company is a target for retaliation by the Chinese and the Europeans. Boeing is the largest single US exporter and ranks up with all of US agriculture for exports.
Is It Time to Buy Foreign Stocks?
The problem for investors and traders is that a full-fledged trade war will have many casualties. The worst hit will be emerging markets that are dependent on the export of commodities. If and when the rally stops it might be precipitous. In that case the issue will be how to profit from a market pullback.
Stock traders make their money on short term market movement instead of investing for long term growth. And a short term correction followed by higher stock prices could result in profits two times for a smart trader. The two ways to take advantage of this scenario are fundamental and technical analysis. The fundamentals are clear in that stock prices are at historic highs. Where traders will profit is from reading technical signals of both a correction and a recovery. Another approach is to use stock options to hedge risk and lock in opportunity for both up and down markets.
The beauty trading stocks instead of investing in them is that traders can profits either direction the market goes.
