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It’s getting a lot harder to chase the stock rally from here on
By Jan-Patrick Barnert & Ksenia Galouchko | Bloomberg Opinion
Don’t get too greedy.
that’s the chorus from many investors who are entering the second half of the year with double-digit stock gains already under their belts.
Global equities have decoupled from a worsening economic backdrop after rising about 13 percent in 2023, prompting warnings from some of the world’s top money managers that chasing the rally from here on is a risky move. Growing corporate profit warnings are also driving home the message.
“Resilience now is sowing the seeds for fragility down the line,” said Andrew McCaffery, global chief investment officer at Fidelity International. “The ‘best-flagged recession in history’ still isn’t upon us. But that recession will come when the lagged effects of policies eventually take hold.” where valuations look rich after an AI-fueled surge. Investors and strategists are also concerned the concentration of this year’s market rally in a handful of megacap tech stocks means that bad news for the group could exacerbate declines for equity gauges overall.
Increasingly hawkish centralbank rhetoric and a slew of profit warnings are denting optimism of a soft economic landing, after an action-packed first half that included a US regional banking crisis and a $5 trillion tech bounce powered by the hype around artificial intelligence.
Historically, barring the Great Depression in 1929, the S&P 500 has had positive returns every single year when it has gained 10 percent or more in the first half. Thomas Schuessler, portfolio manager of DWS’s €21 billion dividend fund, sees no good reason to fully hold off from investing in stocks.