Monday, 3 October 2016

After gain in third quarter, US stocks could go higher still in fourth

US stocks had a good third quarter.

The S&P 500 rose 3.3 percent and now has a gain of 5.5 percent since the start of the year. The technology sector led the gains in the S&P 500 in the third quarter with a rise of 12 percent.

The gain in technology stocks is encouraging to Dan Morgan, portfolio manager at Synovus Trust Co. “It’s people looking for growth,” he said.

David Kelly, chief global strategist at JP Morgan Asset Management noted that cash and bonds are “paying nothing”. He said: “That makes me still an equity bull.”

Dennis Davitt, chief investment officer at Harvest Volatility Management, also expects the stock market to go higher in the fourth quarter, calling it the “pain trade”.

However, weak earnings could prove a drag on stocks.

“We’ve had weak profit growth for a while now, and equity multiples are pretty elevated,” said Ed Campbell, portfolio manager at QMA. “I wouldn’t be surprised to see us pull back a little bit here.”

Max Wolff, chief economist at Manhattan Venture Partners, cited poor earnings growth as a reason the stock market will “run out of steam” before New Year's Eve.

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