BusinessHABStock market open today: The stock market has had a volatile few weeks, with several major indexes experiencing significant fluctuations.
The Dow Jones Industrial Average has experienced a rollercoaster of peaks and troughs over the past week—on October 9, the index dropped nearly 666 points before rising more than 500 points on October 10 (and then dropping again on October 11).
In response to this volatility, many investors are wondering what the short-term future of the stock market will look like.
Will these fluctuations continue? And how will this impact your investments?
Whether you’re new to investing or an experienced trader, it never hurts to get informed about your options.
Although no one can predict with 100% certainty where the stock market is headed in the short term, there are many analysts and financial experts who have shared their opinion on how they believe things may shake out over the next few weeks and months.
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Stock Market Predictions for the Week Ahead
The stock market continues to whipsaw, with the S&P 500 Index up or down at least a point on any given day. Uncertainty about trade, tariffs, and interest-rate policy makes for a volatile environment. Looking ahead to the coming week, there’s not much clarity about what might happen. But that won’t stop us from making some predictions about what we think might happen. After all, that’s what the stock market is all about: trying to predict which way stocks will move and acting accordingly. Here are 5 stock market predictions for the week ahead:
Earnings Predictions
Earnings season is upon us, and boy, does it look like a wild ride this time. As of Friday, August 16, the average growth in earnings per share for the S&P 500 is expected to be 19.4%. The average earnings growth for the Dow Jones Industrial Average is currently at 21%. This is a wild swing from the start of summer when the consensus was for earnings growth of about 15%. When investors are expecting earnings growth, they generally like to see the market rise, as the expectation is that stocks will increase in value as their price-to-earnings ratio goes down. However, with growth expectations surging while the market hovers near record-high levels, investors have been extremely cautious, and have pushed the market down as they sell stocks to cover their expected earnings growth.
Trade War Watch
As we write this, investors are bracing for another round of tit-for-tat tariffs among the U.S. and China. This time, the U.S. is expected to target $300 billion worth of Chinese goods with a 10% tariff while China is expected to respond with tariffs on $75 billion worth of U.S. goods. We’re also expecting to see more headlines on future negotiations between U.S. and Chinese trade negotiators. There’s also the possibility that an even bigger trade war could be brewing in the form of a deal between the U.S. and the EU. If an agreement is reached, it could cause a far more significant impact on global trade.
Possible Market Shocks
While it’s tough to predict what might cause a market shock, there’s always a possibility of one happening. During the last market correction, we saw headlines on everything from Brexit to Israeli airstrikes on Iranian targets. While we don’t expect any of these things to happen, we could see a potential shock from a major scandal, the announcement of a significant policy change, or even a surprise election result. Any one of these things could cause a significant shift in investor sentiment and cause stocks to plunge. One thing that could cause a plunge in stocks is if we see a significant rise in interest rates. Whether a result of a Fed rate hike or just an increase in rates due to a rise in inflation, higher rates could cause stocks to tumble, as they would be less attractive to investors.
Summing up: Which way might the stock market go?
The stock market has been knocked around a lot this summer, with the S&P 500 Index declining 5.1% since the end of July. While no one is predicting a sudden and violent correction, the general consensus is that stocks could be due for a rest before rising again. However, while we can read the tea leaves and make some educated guesses, it’s important to remember that the stock market is incredibly unpredictable. Any of the above predictions could happen, or none of them could. While you could sit on the sidelines and wait to see which way the stock market will go, you could also miss out on some large market gains. If you’re looking for stocks to invest in, consider sectors that are expected to grow regardless of the general market direction. Financial services, utilities, and healthcare are all expected to see strong growth, regardless of what the stock market does.
Bottom line: Stay flexible and don’t overreact to short-term swings.
We can’t predict the stock market, but we can put ourselves in a position to profit from it, no matter which way it goes. That means keeping an eye on fundamentals and not letting short-term movements in the market panic or excite you.
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