Investing is becoming more of a grind. Expect it to stay that way.
Analysts, mutual fund managers and other forecasters are telling investors to expect lower returns from stocks and bonds this year than in past years. They are also predicting more severe swings in prices.
The good news is that few economists are predicting a recession, meaning stocks and other investments can avoid a sustained slide and keep grinding higher, analysts say.
This year is expected to look more like last year — with gyrating stock prices on track to end close to where they started — than the bull market’s euphoric earlier years like 2013 and its 32 percent surge in the Standard & Poor’s 500 Index.
The list of reasons for muted expectations is long. Economic growth around the world remains weak, and earnings growth for big US companies has stalled.
While it is worth knowing the general sentiment on Wall Street, it is also worth remembering financial forecasters have a spotty record for accuracy.
Analysts cite a long list of risks that could upend their forecasts. Investments could tank if an unexpected spike in inflation rips through the global economy, or if the slowdown in the world’s second-largest economy, China, ends up even more severe than feared.
However, there is some comfort in the subdued forecasts — they are a sign that the greed and mania characteristic of past market peaks, such as the dot-com bubble, might not be a problem.
Analysts expect profits to stabilize next year, but companies across many industries are groping for revenue growth amid the still slow global economy.
Stocks in the S&P 500 are no longer cheap relative to their earnings, the most common gauge of stock prices. The index is trading at 17.2 times its earnings over the past 12 months, higher than its average of 14.5 over the past decade.
The already high stock prices leave little room for them to rise further without some impetus from the economy or better profits.
Investors should also brace for dips. The market’s big drop last August was rattling because it had not happened since Oct. 2011, an abnormally long time.
Goldman Sachs Group Inc strategists forecast the S&P 500 will end up 4 percent this year, while Barclays PLC expects the index to rise 9 percent and Deutsche Bank expects it to rise 11 percent.
The S&P 500 gained 15 percent annually on average from 2009 through 2014, not including dividends.
Investors have a strong yen for foreign stocks. They poured a net US$208 billion into international stock funds in the past year, while pulling US$56 billion from US stock funds.
One reason for the migration is that investors want to make their portfolios look more like the broad market. Foreign stocks make up about half the world’s market value, but are often just a sliver of 401(k) portfolios.
Also, central banks in Europe, Japan and elsewhere are pumping stimulus into their economies to drive growth, when the US Federal Reserve is moving in the opposite direction.
Earnings growth in Europe and other regions looks to be accelerating more strongly. Dale Winner, portfolio manager at the Wells Fargo Advantage International Equity fund, expects profits for European companies to grow in the neighborhood of 15 percent.
Changes in the value of currencies can skew returns, and growth from country to country can be uneven.
For example, as China shifts its economy toward consumer spending, it is hurting Brazil and others that produce the commodities that China used to be so voracious for.
Prices of bonds in mutual fund portfolios drop when rates rise, because their yields are less attractive than those of newly issued bonds. However, analysts say Armageddon is not arriving, even though critics have long warned about a “bond bubble.”
Most importantly, the Fed plans to increase short-term rates slowly and by very small increments.
“Lower for longer” has become a mantra among bond investors.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
FUTURE PLANS: Although the electric vehicle market is getting more competitive, Hon Hai would stick to its goal of seizing a 5 percent share globally, Young Liu said Hon Hai Precision Industry Co (鴻海精密), a major iPhone assembler and supplier of artificial intelligence (AI) servers powered by Nvidia Corp’s chips, yesterday said it has introduced a rotating chief executive structure as part of the company’s efforts to cultivate future leaders and to enhance corporate governance. The 50-year-old contract electronics maker reported sizable revenue of NT$6.16 trillion (US$189.67 billion) last year. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), has been under the control of one man almost since its inception. A rotating CEO system is a rarity among Taiwanese businesses. Hon Hai has given leaders of the company’s six