The odds of an equity market correction of 10% or more are said to be low due to a combination of improved market dynamics, better investor sentiment and positive price momentum.
Asset manager NN Investment Partners, which made the prediction, also pointed to good US earnings in the second quarter, underlining better corporate fundamentals and predictable Federal Reserve policies.
While the FAANG (Facebook, Apple, Amazon, Netflix and Google) stocks caused a jitter last month led by Facebook, these losses were not enough to derail the market, added the firm.
“In recent weeks, we have mainly seen an improvement in market dynamics,” said Patrick Moonen, multi asset principal strategist at NN Investment Partners. “This of course does not alter the fact that in certain market segments such as the FAANG shares in which positioning is extreme, substantial corrections can or will occur on the basis of an adjustment of expectations.”
He added: “For the time being, I do not yet see any contagion to other market segments.”
Despite the optimistic view, some market watchers fear that trade tensions between the US and its partners could affect growth. Earlier this month, Stanford University’s Hoover Institution warned that “if the trade war between the US, China and Europe intensifies, it can lead to a recession”.
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