|Photo by Anna Nekrashevich
Until now, stocks have been getting better after a bad period last year. The Nasdaq, which includes technology companies, has done the best and gone up by 20% this year. The S&P 500, which is a measure of many big companies, has gone up by 8%. The Dow Jones Industrial Average, which shows how well certain companies are doing, has stayed about the same this year. Technology companies, especially those connected to artificial intelligence, have gone up a lot, while financial and healthcare companies haven’t done as well. But there are still many things that could go wrong. China might have trouble paying its debts, and its economy might not grow as much. There could also be a time when the economy gets worse and there are problems between different countries. That’s why it’s important to be careful and pay attention to what’s happening with the stock market and the economy. Here are seven important tips for buying stocks in June 2023.
Tech Stocks on Alert
Be careful; there might be a problem with technology stocks. They have been doing really well this year because of artificial intelligence (AI). But some people who work on Wall Street are now saying that there might be a bubble forming. That means the prices of these stocks are going up too fast and might not be based on their real value. For example, the price of Nvidia has gone up by 110% this year, Meta Platforms by 98%, and Microsoft by 30%. Even a small AI company called C3.ai has seen its stock go up by 140%.
Investors should be careful with technology stocks. It’s good that they are doing well now, but be ready for sudden drops in their prices. The market for technology stocks is starting to become too exciting, and just the mention of “AI” is making the prices go up even more. These are signs that people might be making decisions without thinking clearly, and things could get unstable in the next few weeks and months. When you’re not sure what to do, it’s better to choose big companies that have been successful for a long time. Remember, some stocks will do well, but others won’t.
Opportunities in Pharma Stocks
There are some important things happening that could have a big impact on pharmaceutical stocks. First, there are new weight loss medications that experts think will become really popular and make a lot of money for the companies that make them, like Eli Lilly and Novo Nordisk. These medications could be as successful as other well-known drugs for issues like erectile dysfunction and hair loss.
Another thing to watch out for is the possibility of more COVID-19 cases around the world, especially in China. China is getting ready for a potential new wave of COVID-19 infections, and they might have as many as 65 million cases per week by the end of June. This could be a chance for companies like Moderna and Pfizer, which make important medications for the disease, to sell more of their products.
There are even rumors that China might approve the COVID-19 vaccines made by Moderna and Pfizer for use in their country. This would be a big deal because China has a very large population of 1.4 billion people. It could mean more sales for these companies if their vaccines are allowed to be used in China.
Bank Crisis is not Over
The CEO of JPMorgan Chase, Jamie Dimon, has given a warning that the banking crisis might not be finished yet. In fact, the problems we’ve seen with some smaller U.S. banks could just be the start of more difficulties in the banking industry. This could happen if interest rates stay high for a long time or if the U.S. Federal Reserve decides to raise rates even more.
Dimon specifically mentioned that loans related to commercial real estate could become a big problem for some U.S. banks. He said, “Banks are being more careful with giving out loans because it’s the easiest way for them to keep their money safe.” If this continues, it could be bad for the U.S. economy and make things even worse for banks and their stocks. Actually, bank stocks have been some of the worst-performing investments this year.
If more problems come up, it’s likely that bank and financial stocks, including those of companies like American Express and Charles Schwab, will go down in value. So, it’s important to keep an eye on these stocks in case more trouble arises.
Traders Predict a Lower Ending for the S&P 500 Index
According to a new poll by Reuters, most traders and market experts think that the benchmark S&P 500 index will go down by the end of the year. There are a few reasons for this, such as higher interest rates, problems with banks, and companies not earning as much money as expected. Traders predict that the S&P 500 index will end the year at around 4,150, which is a bit lower than its recent closing value of 4,192.63. However, even with this decrease, the index would still be up by 8% for the year.
The S&P 500 recently reached its highest point in nine months, even though it went down by 19.4% in 2022. Reuters asked 43 traders and experts for their opinions, and most of them said that they expect U.S. stocks to stay within a certain range until the end of August. These poll results are a bit lower than the predictions made in February, which suggested the index would end the year at 4,200. The traders also mentioned that they expect the Dow Jones Industrial Average to weaken in the second half of the year and finish with a small 2.8% increase.
Be Prepared: Interest Rates May Rise
Many people on Wall Street have been predicting that interest rates will be lower by the end of 2023. They think that because of a possible economic recession, the Federal Reserve (the central bank of the United States) will have to lower interest rates by Christmas. However, this might just be a wishful thought because inflation (which means prices going up) has been stubbornly high. Important figures like Jamie Dimon, the CEO of JPMorgan Chase, and Ben Bernanke, a former chair of the Federal Reserve, have warned that interest rates might actually need to go up more in the next few months to bring inflation back down to the central bank’s target of 2% per year.
Although the Federal Reserve has stopped raising interest rates for now, that doesn’t mean they won’t start lowering them this year or even raising them again if necessary. In Canada, the neighboring country, the central bank also stopped raising interest rates before the U.S., but they found out that inflation unexpectedly went up in April this year. The same thing happened in the European Union, where headline inflation increased in April. If inflation starts going up in the U.S., the Federal Reserve might have no choice but to raise interest rates in the near future.
Gold Prices May Reach New Highs
The price of gold has stayed around $2,000 per ounce, reaching near its highest point ever at $2,072.49. People are worried about the banking sectors in the United States and Europe, as well as the possibility of a global recession. Because of these concerns, investors are buying gold because it’s seen as a safe investment during uncertain times. This increase in price is good news for gold mining companies like Barrick Gold and jewelers like Signet Jewelers.
But it’s not just gold that has gone up in value this year. The prices of silver and palladium have also risen a lot. Silver is now being traded at almost $24 per ounce. With the Federal Reserve raising interest rates to their highest level in 16 years, people are still worried about U.S. banks and the economy slowing down. There are even expectations that the economy might go into a recession later this year. Because of these worries, investors are putting more of their money into gold as a way to protect themselves.
The IPO Market Set to Bounce Back
The market for initial public offerings (IPOs) has been sluggish for the past two years after a surge of new stock offerings during the COVID-19 crisis in 2020. In 2022, the total value of IPOs worldwide, including special purpose acquisition companies (SPACs), dropped by 72% to $170 billion compared to the previous year, according to the White & Case law firm. In the first quarter of this year, global IPOs, including SPACs, reached $26 billion, a 53% decline compared to the previous year.
The good news is that experts predict the IPO market will rebound in the second half of this year, with several highly anticipated stock offerings in the pipeline. Companies like British chipmaker Arm, Irish e-commerce company Stripe, and U.S. social media firm Reddit are considering going public. They have been waiting for more favorable market conditions, but things may change in the coming months. Stay tuned for a potential resurgence in the IPO market.