6 Month Market Forecast
Only a lonely few prognosticators in the housing or stock markets are venturing a projection for the 6 months ahead. Given the amazing momentum right now with vaccines, personal savings, consumer spending, job gains, and more, how could the next six months be anything other than wonderful?
Over the May to October forecast period, we’re going to see more stock market index records. The Dow, S&P, NASDAQ and Russell will surge to new records given the very positive economic signals of late. Sure there’s crash talk and volatility as the US and the Globe heat up. Yet, the momentum is clear and any inflation that occurs might encourage more investment (bond market hates inflation). 6 months is good. But don’t get carried away.
Take a good look at the fastest gaining small, mid and large cap stocks with an eye on safety and hedging. This is a market bubble, but there’s no consensus on when the bubble will burst (2023?). Experts believe the market will cool, but they’ve been saying that for years, so you have to take their predictions and projections with a grain of salt.
Covid 19 still influences the markets. Although the new Covid variants are threatening, the vaccines are progressing fast in the US, so we’ll see the economy open faster by the summer. By fall, which will be a historically amazing time for retail and industry, profits and prices will continue very high. The key is to look for the best value stocks and maybe pass on Bitcoin (although USD isn’t a good investment).
Best Summer Stocks to Buy?
Investor Place offers up their best picks:
- Wayfair (NYSE:W) (retail furniture boom)
- McDonald’s (NYSE:MCD) (consumer spending, end of covid)
- Carvana (NYSE:CVNA) (used cars)
- Carnival Cruise Lines (NYSE:CCL) (travel and tourism prices rising fast)
- Vail Resorts (NYSE:MTN) (hotels opening up, recreation coming back)
- Visa (NYSE:V) (consumer spending on credit rising)
- Nvidia (NASDAQ:NVDA) (chips for phones, gameplaying, and cars)
The Market is Complicated but Overpowered by Growth
Few indicators suggest a stock market crash or a housing crash and financial collapse is imminent. The crash factors are complex. Complexity with extreme price growth means the threat will surprise everyone. Credit and the stimulus will take care of the next few years. Inflation will happen, but economists don’t believe it will be damaging to growth or profits.
Americans are worried about a housing market collapse, but with such low housing supply, it’s hard to see anything dropping home prices. Stimulus will grow construction even in a grossly overregulated housing market. Home prices are surge out of hand this spring and summer. Bidding wars will abound and many homeowners will finally decide to sell to catch some of the windfall.
CBO Report: Positive for 5 Years
“Specifically, real (inflation-adjusted) gross domestic product (GDP) is projected to return to its prepandemic level in mid-2021 and to surpass its potential (that is, its maximum sustainable) level in early 2025. In CBO’s projections, the unemployment rate gradually declines through 2026, and the number of people employed returns to its prepandemic level in 2024.” — CBO Overview of the Economic Outlook: 2021 to 2031.
One expert says the euphoria is gone and it’s hard to get investors excited. Well, that just isn’t true. People are still depressed through the pandemic, and are only re-emerging in the spring of 2021. There will be plenty of crazy euphoria by late summer when Covid 19 infections dwindle.
Many of the bears are looking at issues that might not kill the economy for a few years. The Biden stimulus money will help bridge all problems in the next 6 months. One expert believes the stimulus money will actually reach the capital markets this time, where Trump’s stimulus money did not.
By July/August, the US economy will be roaring and it will take the stock market and housing market with it. The Reddit rebellion may turn out to be the biggest threat to the traditional markets, but the shift to unregulated markets will take years.
Clouding the 3 month and 6 month outlook however, is the aforementioned housing market where a tsunami of evictions and continuing plague of rent defaults threatens. There is a level of volatility, uncertainty and a departure from old statistical trends, that makes stock market outlooks seem sketchy.
Yet if you’re a stock market investor, potential stock investor, home buyer, or employer, you need to be keying in on the core of economic paths (cyclical stocks).
I forecasted a w shaped recovery 4 months ago, and the experts forecasted a V shaped recovery. What may be happening is a K shaped recovery as stimulus has lagged so badly. Yet as the recovery picks up steam, we could see unemployment drop fast as the remaining small businesses reopen. Those survivors will have their markets to themselves as marginal businesses have dropped out.
Housing and Travel Sectors Will Give Markets a Lift
Just last week, we saw air traffic at it’s highest since before the pandemic. That is a significant signal given most prople wouldn’t dare fly as the variants spread.
It will be a while before airlines, cruise lines, hotels, manufacturers, real estate investment firms, big restaurant chains, city transit services, etc. come back to life. New York is in big trouble.
How Will the Housing Market Hold Out?
Right now, the housing market recovery is on a tear. If it wasn’t for the housing shortage, the growth outlook from here forward would be upward. Housing experts forecasted big growth for multifamily, and of course the exact opposite has happened in that that sector. Not a good guess.
Instead, new home construction is the big trend. However, condo and apartment sales are still okay given the fact there’s no where else to live.
With the coming eviction crisis, forecasts are for falling housing prices. A tech slowdown in the Bay Area could see rapid housing value declines there, and in New York, the exodus and rent failure combine to create crash conditions.
Of course, NAR’s latest housing market stats show a healthy market and new home sales are hot.
Real estate is seen as a much better investment and more first time buyers are jumping in. The $5 trillion in the money markets could move to the home purchase markets, thus stimulating banks, consumer sales, and fueling up new home construction. This could raise the outlook for the next 6 months and next 3 years.
The Last 6 Months of 2020
Q3 & Q4 will be fantastic for retail and industry. Consumer spending will boom as Covid is in the rear view and holiday spending in cash and on credit will make a big gift giving season. The euphoria of experiencing normal life without as much fear, will spur spending. Americans have a lot of savings and an awakening spirit of well being again.
Standard Outlook: Recovery in 2021
But the economy could also crash. In fact, even the housing market with its low mortgage rates and vicious shortages of housing stock, and rising new home construction growth could come to a shuddering halt if the Democrats win this election and no vaccine appears.
conference board gdp forecast
Voters May not Care About China’s Danger
And there is no certainty that President Trump can do much with the economy either. His talk about stopping imports from China has largely failed for the last 3.5 years. Manufacturing growth in the US has been disappointing and the imports continue. US exports are poor and now the domestic economy is struggling. Without further major stimulus, the outlook is dire.
And going into the election, one of his biggest promises has evaporated. Tariffs don’t get rid of the trade deficit problem, and China is boasting economic growth.
The Democrats on the other hand, have never said anything negative about China’s communist leaders even though they launched the pandemic, invaded Hong Kong, have enjoyed decades of American technology theft, and taken advantage with special trade status and a ridiculous $500 billion yearly trade deficit with the US.
Yet voters have tired of the President, show no interest in the deficit, supply threats, or International trade, and may be willing to vote for anyone to replace him to then let them do as they please.
That is the precursor of economic disaster.
The key questions economists and reputable journalists are asking is whether Federal funding can continue and whether the Corona Virus pandemic will sweep across the full union like wildfire.
With respect to the Presidential election, a Trump win would keep an emphasis on reopening the economy and supporting its growth. A Biden win means a return to higher taxation, more China imports, slow reopening, more business and housing regulation, and a war with angry Republican voters.
The bombed out ship the Democrats want to take over, could have nothing left. During November, voters might realize the Democrat’s intentions are not worthy, and Trump could get another last minute election win.
The Coming Fall Flu Season
With respect to fighting Covid 19, the matter is ominous. As the fall disease season approaches, young people are spreading the virus like there’s no tomorrow. That means more shutdowns will likely occur by November, which won’t be good for the business friendly Trump. Trump is an economy, business profit and jobs president and without those, he is unwanted.
Logic then tells us a Biden win is in the works unless President Trump gets smart and begins talking about Covid 19 control, safety, the job losses to China, increased taxes and regulation threat, the threat of rising interest rates, inflation, and the stoppage of new home building along with other Biden weaknesses.
This means all the problems we have now, will be worse in December with out of control Covid 19 infections.
The Prognosis for the Fall
The ever pessimistic Goldman Sachs economists reduced their third-quarter US GDP growth outlook from 33% down to 25%. And they’ve raised their full-year loss projection for 2020 from -4.2% to -4.6%. They forecast 8% growth in the fourth quarter.
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