Investing.com — The primary half of 2024 was marked by a synthetic intelligence-driven soar in inventory markets, volatility in bond yields, and political uncertainty, based on analysts at UBS.
So what does the third quarter have in retailer for traders? In a be aware to shoppers on July 1, the analysts outlined a number of key themes they are going to be specializing in throughout the present three-month interval.
First, they stated that whereas they imagine the momentum of the AI increase will stay robust within the coming months, many are questioning concerning the endurance of a tailwind that has lifted a comparatively small variety of shares associated to the nascent know-how.
A part of this fear, they added, stems from a latest dip in shares of Nvidia (NASDAQ:) after the AI-poster youngster touched a file excessive degree and briefly turned the world’s Most worthy firm by market capitalization in June.
Regardless of the uncertainty, the analysts stated the AI phase “currently offers the best mix of attractive and visible earnings growth profiles, strong competitive positioning, and a reinvestment runway.” Consequently, they’re significantly bullish on semiconductor companies.
Outdoors of AI, the analysts additionally predicted that the Federal Reserve will probably start to ratchet down charges within the second half of 2024.
Minutes launched earlier this week from the Fed’s June coverage gathering confirmed that officers have been reticient to start to slashing rates of interest down from a greater than two-decade excessive vary of 5.25% to five.5% till they’d seen extra proof of waning inflation. Nevertheless, the analysts argued that information on each inflation and financial exercise “have been supportive of a loosening in financial conditions.”
They’re predicting that the Fed will roll out two price cuts this 12 months, with the primary in September.
By way of particular asset lessons, the analysts added that they view gold as a hedge in opposition to ongoing geopolitical tensions and “election-related fears around factors like Fed independence.”
They projected that gold costs will rise to $2,600 per ounce by the top of the 12 months and $2,700 an oz. by mid-2025. was buying and selling at $2,364.07 per ounce at 06:48 EST (10:48 GMT) on Friday.
Elsewhere, they stated there may be now an “attractive entry point” for traders trying to transfer into mounted earnings from money previous to an anticipated decline in yields stemming from the Fed’s anticipated price cuts.
“If the Fed pivots in September, as we expect, U.S. Treasuries should rally as the market shifts its attention to the magnitude of rate cuts not only this year, but also next year and beyond,” the analysts stated.
Lastly, U.S. politics will likely be a key theme for markets, particularly after a disastrous debate efficiency by President Joe Biden final week solid doubt over his means to remain within the race for reelection. In the intervening time, polls counsel that the November vote will lead to a so-called “red sweep”, with Donald Trump regaining the presidency and Republicans taking management of each chambers of Congress.
In such a state of affairs, the analysts really useful having “sufficient exposure to financials”, noting that these firms would profit from conservative lawmakers decreasing business rules. However, they expressed some warning round client discretionary and renewable vitality names, saying they “could lag” within the occasion of a pink sweep.
