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WHAT TO EXPECT FROM THE USA MARKET

5 months. It has only been five months since one of the biggest thumps the stock market has ever suffered in terms of speed and intensity. Panic reigned on Wall Street on March 16, 2020. The U.S. benchmark index, the S&P 500, had posted -30% in not even 20 days. And he did not seem intent on stopping. Reports from Goldman Sachs, one of the world’s most famous investment banks, were coming out on those dates. Goldman’s forecast was all in all positive. They saw a further decline in the index but a very small one, then heading for a recovery to pre-crisis levels by the end of the year. Here is a graph, precisely, from their mid-March report.

S&P500 Report by Goldman Sachs

The predictions were indeed fulfilled. With a low of 2170, the Standard&Poor 500 began its recovery toward the highs and, I would say, completed it. The famous V-shaped upswing that many did not expect had its best manifestation in the index. This is meanwhile to make it clear how it is always good to follow the markets in trading optics. There is no point in anticipating by looking for downturns or reversals. And Goldman Sachs, in this case, had warned everyone.

A few months ago, at the height of the pandemic, everyone believed that expectations for the economy in the coming year would remain uncertain for a long time. Now, a more optimistic wind would seem to be blowing.

In fact, analysts at Goldman Sachs have decided to revise upward their estimates for the 2021 U.S. economy while also raising their earnings per share forecast for the S&P 500 Index. In short, solid recovery was not enough. Potential growth is now expected. Arguably, now the conviction of a viable vaccine for next year is giving that boost that the markets were looking for. Forecasts for the first quarter of 2021 have been adjusted upward by 10 percent.

The targets are 3600 by the end of 2020 and 3800 by the end of 2021.

Who knows if Wall Street analysts will be right about market performance this time as well. Many variables, however, now wait to enter the model. Fear of a stronger and more virulent second wave of coronavirus, the U.S. election and who knows what other “noise” may shake the market.

What we need to do now is to be cautious. Mind you, this is not to say that we should not invest or not trade. We just have to do it in a more studied and conscious way. Through CFDs (which we use with the broker INFINOX), in fact we are fortunate to be able to take both upward and downward positions using levers of even less than 1. And this is a help in case the markets turn red for a while, because we would be able to hedge our portfolios in a simple way, without resorting to complex instruments.

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