08 July 2019Reading time: 2 minutes

It looks like the S&P 500 has fully benefited from the flourishing American economy. In the first quarter of this year the economic growth was 3,2 percent on an annual basis. Also the unemployment in the United States decreased over the last month to 3,7 percent.

In the first half of this year the index rose continuously and even shortly touched the 3000 points in June. However, analysts of Morgan Stanley now fear that a major correction of the S&P 500 might happen during the second half of this year.

The IMF (International Monetary Fund) expects that the American economic growth could fall back to 1,8 percent next year, with the unemployment remaining at the same level. However, analysts of Goldman Sachs expect that the American economy will continue to grow with 2,3 percent. It remains to be seen how the American economy will develop in the next period, which amongst others depends on how the geopolitical tensions between the US and China will turn out.

Although the Federal Reserve leaves the interest rates untouched for now, much to the frustration of US President Donald Trump, the Fed did adjust their expectations for the inflation rates downwards to 1,5 percent for the second half of 2019. Earlier the Fed expected 1,8 percent.

Analysts of Morgan Stanley fear that the S&P 500 could reflect a correction of approximately 10 percent in the third quarter of this year. The main cause would be the more negative sentiment among investors worldwide. Especially the trust in the political policy of Trump towards China seems to fade. If, by extension, macroeconomic figures turn out to be disappointing as well, this could lead to a strong reaction on the stock markets.

The three largest companies within the S&P 500 are Apple, Alphabet and Microsoft. Especially Apply claims to experience more and more problems due to the geopolitical tensions and import tariffs. The upcoming American quarterly results season could provide more clarity on which way the American economy is heading and in extension of that, what the future will behold for the S&P 500.

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22/04/2021 19:24:08