The U.S. government’s massive $1.9 trillion infrastructure spending last year has sparked a rebound in the US stock market, with stocks rising at an average annual rate of 5%. However, there are some factors that may derail that rally. Some of these factors include the government’s COVID-19 policy, China’s rebalancing, and Software stocks.
The stock market is set for a strong second half of 2022, according to JPMorgan. It’s likely to be buoyed by an annualized inflation rate that’s expected to decline to 4.2% from 9.4% by the end of the forecast period. This would allow the central banks to adjust their policies and prevent an economic downturn. The economic environment in the US is conducive to strong growth, but the current slowdown should be avoided.
Investors are beginning to talk about rebalancing their portfolios in the second half of 2022. It is important to consider selling some assets while purchasing others to meet RMD requirements. Then, rebalance your portfolio as necessary to keep your investments in a good position for the long term. You can also consider selling a portion of your stock portfolio to reduce your capital gains tax burden.
China’s COVID-19 policy
COVID-19, an asymmetrical disease, has been a persistent issue in China’s relations with the US. Despite the emergence of the virus, the U.S. has lost international influence as it mishandled the domestic response to the disease, failed to bring other nations together, and stoked international resentment. In its domestic response to COVID-19, President Donald Trump has harped on China’s origins and criticized the European Union’s containment efforts.
While the U.S. stock market is in a bear market, software stocks are proving to be a strong investment opportunity. US economy continues to tighten while China and Japan are aggressively easing their economies. The US value tech stocks are nearing attractive levels after a six-month rout. Some of these companies include Facebook (FB), Paypal (PYPL), and Taiwan Semiconductor.
The biotechnology industry includes companies that develop drugs and diagnostic technologies for cancer, genetic diseases, and autoimmune conditions. Biotech products undergo expensive, time-consuming trials before they are approved for sale. Because of these lengthy processes, investors often wait for years before they learn whether a drug under development will pay off. The biotech industry comprises both large corporations and start-up companies. In addition to large companies, many smaller biotech companies have made significant acquisitions recently. For example, Pfizer recently acquired Arena Pharmaceuticals and a French company bought Zogenix.