US Stocks down Circa 10%. Is it Time to Buy?

Dear Reader,

US stocks measured by the main indices are down circa 10% from their recent highs.

Is this the bottom? Is it time to buy?

Yes, I think for now this is the bottom for US stocks and this should prove a good buy the dip opportunity.

Why? I think the protectionist trade war between US and mainly China will continue. The result is that China's GDP year on year growth will slow from currently 6.7% in 2016 to 2-3% in the next 3-4 years. I will forecast that China's GDP year on year measured in USD terms will soon even start to contract. These developments will have an effect on the US economy, albeit small. US GDP growth year on year will hover just below 2%. How will this affect stocks? US stocks should continue to rise for the next 2 years driven by the recent tax cuts and continuing world GDP growth.

I think the current economic cycle will end in 2-3 years with a medium, but protracted recession. But for now US stocks should go on going higher. US big 5 technology stocks will benefit the most in the next 2-3 years until the recession ensues. When the world's GDP starts falling again US technology big 5(Apple, Google, Amazon, Facebook, Microsoft) will loose more than 40% of their current market value. Why? Because, basically the US top 5 technology stocks are overpriced, in a small bubble. The bubble will burst and will coincide with the world's economic recession, saturation of the smartphone market and stricter government regulation.

Global banks will benefit handsomely in the next 2-3 years having in mind that the Federal Reserve  and Bank of England are already raising rates and soon the European Central Bank will start raising their target interest rates. Commercial banks will benefit from the higher interest rate environment by raising the rates on credits more than they raise the rates on deposits. What is more, currently global banks are undervalued. They are value plays and they will soon start to realize their potential.

I expect soon oil stocks will rise by 20-30%. I forecast that both WTI and Brent crude oil will exceed soon 80 USD. This will benefit hydraulic fracturing oil extracting companies the most, since they are high cost producers. Other oil companies, especially major ones will also increase their market capitalization by a wide margin.

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Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!


Kind regards,
Petar Posledovich