Investors appear to have regained faith in the U.S. economy if the steady improvement in stock prices is any indicator of market sentiment. The S&P 500 has shown a good 6% improvement this year and, across many sectors, investors have been steadily buying into stocks of various kinds. The inertia in the markets and the risk averseness seem to have worn off as many of the high return- high risk stocks show good following alongside the ‘sure winner’ ones like Coke.
In fact, economists point out that high risk stocks are being favored increasingly by investors who would have earlier stuck to ‘safe’ ones in the utilities and telecom basket. This ‘safe’ basket, has, quite surprisingly, kept a low profile when compared with the market performance of the relatively risky stocks. The investment trend is clearly not conservative at this point with investors vying with each other for stocks like Netflix that keep inching upwards almost every day.
Technology, energy and materials are some other sectors that are popular with investors. The earlier focus on housing and finance seems to have given way to this new trend. Considering where housing prices are still stagnating post recession, the market has good reason to leave this sector well alone. However, shift or no shift, experts say that the trend clearly shows a return of faith by investors in the economy.
Growth is the key factor when it comes to today’s investor, experts conclude from the statistics. While stable stocks still retain their loyal followers, new ones that promise quick growth, are fast picking up momentum too. While this shows that spending is clearly on a roll now there is some doubt as to how long this trend will continue.
One reason for this pro-market trend is that investors now realize that many companies have cut back debt dramatically and have substantial cash reserves to spend on expansion and improvement activities. Before these activities happen, the investors want to move in to get a slice of the larger pie that will soon be available to them. Analysts support this investor view and advise that the time is right to buy into stocks that have a bright future.
They believe that conservative investors who are just waiting for the economy to contract post the rally are simply losing an excellent opportunity to make some good investments. The fact that the political turmoil in Egypt has not made a dent in the U.S. markets can be perceived as evidence of the strong investor faith here, experts say.