A global fund manager has predicted the Nasdaq Composite Index will reach record highs by the end of the calendar year as a result of the larger-than-expected drop in tariffs between the United States and China confirmed this month.
Global X senior investment strategist Billy Leung noted the S&P 500 rose by 3 per cent and the Nasdaq Composite Index by 5 per cent in response to the announcement tariffs between the US and China had significantly dropped. Further, Leung pointed out Chinese equities jumped 3 per cent in trading on 12 May, as measured by the Hang Seng China Enterprise Index.
He recognised the optimism was also reflected in the fact defensive assets such as US Treasury bonds and gold fell at the same time.
Australian investors have looked to take advantage of the trend, with inflows to the Global X FANG+ exchanged-traded fund (ETF) up 28.5 per cent in the year to date and inflows to the Global X US 100 ETF up 16.5 per cent to 12 April.
Leung indicated this sentiment among domestic investors is likely to continue.
“The latest market movements are likely to push Australian investors further into US and Chinese share markets. Having already been buying into the dip in April, now there are likely to be even more retail investors buying following the sharp rises in US markets [last week],” he said.
“Strong inflows into US equity ETFs reflect continued confidence in the US exceptionalism narrative and sustained appetite for exposure to the world’s largest economy and, increasingly, the world’s second-largest economy, China.”
According to Leung, the immediate risk of further trade tension escalation has abated and this will assist a continued stock market rally.
“This technical reversal is likely to broaden, particularly into areas that had lagged since April,” he said.
To this end, he is anticipating the Nasdaq Composite Index to hit a record high 22,100 by year’s end, based on 15 per cent earnings growth and a 24-times forward price-earnings ratio.
“This gives room for mega-cap US technology shares and China innovation equities to recover some ground. The market now has a cleaner base from which to build and more momentum could come from Nvidia’s results at the end of May.” he explained.
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