Selling off due to the US-China conflict gave "bulls" a few more months - analyst

The largest sell-off in Wall Street since April last Friday, October 10, extended the rally in the U.S. stock market for several more months, according to Doug Ramsey, investment director at Leuthold Group. At the same time, the high cost of U.S. stocks and growing risks to the U.S. economy discourage him from acting more aggressively.

"If this cycle is destined to end with anything resembling the traditional peak-forming process, then the final bull market peak has been pushed back at least another couple months. In our case, however, high valuations and rising risks to the U.S. economy are hampering any desire to more aggressively wager on the final stage of growth," CNBC quoted Ramsey as saying in a research note he sent to clients earlier this week.

The economist warned that he sees worrisome trends, including the recent decline in cyclical stocks from the S&P 500 index (companies whose earnings are sensitive to the phase of the economic cycle) versus defensive stocks. "These dynamics are worrisome. However, in our view, the ultimate bull market peak will not occur until signals from traditional market indicators become more pronounced," he added.

Several major Wall Street banks cautioned investors intent on buying on the downside after Friday's collapse: there could be more volatility ahead despite signals from the U.S. and China that they are ready for trade talks, Bloomberg writes. JPMorgan Chase, Morgan Stanley and Evercore expect a period of volatility as inflated stock prices make the market particularly vulnerable to the economic impact of the shutdown and trade uncertainty, the agency said.

Futures on U.S. stock indices fell on October 14 amid new risks of escalation of the trade war between the U.S. and China, weakening investors' appetite for risk, reports Reuters. Contracts on the Dow Jones index fell by 0.6%, on the S&P 500 - by 0.9%, futures on the Nasdaq 100 collapsed by 1.2%. Contrary to the general trend, quotes of U.S. producers of rare earth metals jumped on the premarket, continuing the growth during the previous session: shares of Critical Metals soared by 34%, securities of USA Rare Earth rose by 10%, MP Materials - by 6%. According to Reuters, Wall Street expects Washington to step up efforts to reduce dependence on China in this area.

This article was AI-translated and verified by a human editor