Wall Street is experiencing a shift in sentiment as analysts at both Goldman Sachs and Bank of America have raised their end-of-year target forecasts for the S&P 500. This change in outlook suggests that the earlier rotation out of US equities due to trade war fears may have been an overreaction. The so-called TACO Trade, which has been a popular topic in financial circles, is being overshadowed by the resurgence of the TINA trade, which stands for “There Is No Alternative” to US equities.
Despite recent challenges to the TINA trade, such as the attractiveness of bonds in a high-interest rate environment, the ongoing trade war has made the bond market more volatile. Additionally, talk of the end of American Exceptionalism and a shift towards Europe and other markets may have been premature. In June, the S&P 500’s monthly traded value exceeded that of the Stoxx Europe 600 index, indicating continued strength in US equities.
Goldman Sachs’ chief US equity strategist David Kostin recently affirmed that the TINA trade is still relevant, driven by retirement accounts and retail trading. US households have been actively investing in equities this year, with a record 49% of their financial assets allocated to stocks. This trend has led to a positive outlook for the S&P 500, with major brokerages revising their year-end projections upwards.
The market rally in June and the return of the TINA trade have raised some concerns about the sustainability of the current enthusiasm. A recent study by analysts at Bloomberg Intelligence found that only 10% of stocks on the S&P 500 are driving the index’s returns since April, signaling a lack of broad-based participation. Analysts at Oppenheimer & Co. have echoed these concerns, emphasizing the importance of broader market participation for sustained rallies.
While the outlook for US equities remains positive, it is important to monitor market dynamics and ensure that investments are diversified to mitigate risks. The resurgence of the TINA trade underscores the continued appeal of US equities in a challenging global environment. For more insights and analysis on finance, economics, and markets, subscribe to The Daily Upside newsletter for razor-sharp analysis and perspective. a different perspective on the topic of climate change:
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