Dubai: US equities may have seen their best performance — for now.
The Dow Jones Industrial Average gained 1.57 per cent last, bringing the total to 10.81 per cent in the year so far. The Dow index is about 4 per cent lower from its all-time high of 26,951.81. Similarly the S&P 500 index rose 2.89 per cent last, after having gained 12.59 per cent so far since January 1. The index is 120 points away from its peak of 2,940.91. This strong performance was underpinned by a dovish Federal Reserve and optimism over a truce between the United States and China over trade war.
But, money managers feel that the rally may have run its course.
“The optimism or euphoria which we saw in January is no longer there. Even with the support from central banks the potential upside for equities is limited. I see more downside risk,” Nadi Bargouti, head of asset management, managing director at Emirates Investment Bank, told Gulf News.
“Traders need to be cautious, and be selective. Investors need to be sure that they don’t plain vanilla position,” Bargouti added.
So far the bulls have been in control of equity markets on the back of a growing US economy, and better than expected earnings in 2018 and a dovish Federal Reserve, from whom analysts expect two rate hikes in 2019.
There are many risks facing traders of global equities.
Risks include potential for a disorderly Brexit, possibility for US-China trade talks to break down, including the imposition of more tariffs on European exports by the US, resulting in further economic slowdown in Europe.
“Investors are faced with elevated levels of risks as we head towards the first quarter. While the recent falls in bond yields amid the prospects of interest rates remaining low for longer may keep the downside limited, I am sceptical that the gains we have seen so far this year can be repeated in the upcoming months,” Fawad Razaqzada, technical analyst at FOREX.com.
Analysts have mixed views on the outlook for gold prices.
International gold prices extended gains for a second straight week. Gold for April delivery closed 0.5 per cent higher at $1,302.30 (Dh4,782.6) an ounce.
“The overall upbeat mood seen with European equities also kept pressure with gold prices and if we see a continued move higher with US stocks, we could see further pressure for the precious metal,” Edward Moya, senior market analyst at OANDA said. Comex gold has underperformed other asset classes, gaining 4.3 per cent in the past three months.
“The dollar is seeing reduced demand and the concurrent lack of progress on the Chinese and North Korean fronts seems to build a bullish case for the yellow metal with the $1,315 and $1,325 levels the next areas of interest,” Konstantinos Anthis, head of research at ADS Securities, said.