American Bank strategists indicate that the ratio of the Nasdaq 100 index to the S&P 500 index is approaching a level that could trigger a closing of U.S. stock trades.
The American Bank team led by Michael Hartnett indicates that the ratio of the tech-heavy Nasdaq 100 index to the S&P 500 index remains above the peak reached in 2000, allowing investors to confidently go long on American tech stocks and the dollar.
They warned in a report that falling below this level would strongly drive people out of the 'US exceptionalism' trade.
Hartnett mentioned last week that next year investors should start allocating more funds to stocks outside the United States, recommending stocks in China and Europe. After a more than 20% increase in the S&P 500 index last year, it has risen another 25% so far this year.
According to American Bank strategists, if history is any guide, the S&P 500 index may experience double-digit increases or decreases again in 2025. They state that the 'secret' to further rebounds in U.S. stocks is a decline in bond yields.
However, the team expects bond prices to reflect rising inflation at the beginning of next year and a reduction in the magnitude of Federal Reserve rate cuts, which will keep yields high and limit upside potential for risk assets. The American Bank's 'investment clock' also suggests that commodities will rise in 2025, corporate profits will grow, and interest rates will increase.
Driven by a strong U.S. economy, Federal Reserve rate cuts, and a boom in artificial intelligence development, the S&P 500 index continues to trade near historic highs. According to a report from the American Bank, U.S. stock funds are set to attract record inflows this year, with an annualized scale reaching $448 billion.
In contrast, the 'unpopular' European stock funds are expected to see outflows of $58 billion in 2024.
Article forwarded from: Jin Shi Data