Successful online stock trading requires a clear understanding of the market. And if you look ahead to the coming months, it’s hard not to think of the volatility that is expected to hit the US markets.

The stock market has some risks coming its way for the rest of 2016. The coming days could be volatile and there is a lot that could happen. So what are you to expect?

It is worth remembering that the current bull cycle of the stock market has been around for seven years. Conventionally analyzing, the market is overvalued though the S&P 500 index is quite close to its all-time high. US stocks are among the most expensive out there, and sources point to areas such as REITs, consumer staples and utilities as having stocks that are particularly in their all-time highs.

All this bullishness could be laying the building blocks for a period of volatility. But high valuations need not necessarily spell the transformation of a bull market to a bear one, according to some researchers. They say that the present valuations that are slightly above average could lead to stock returns faintly below average in the coming 10 years.

But analysts point out to three major factors in the coming months that could make the markets more volatile:

  • One of these is the US presidential vote of November 8. If an unexpected Trump victory seems to be a possibility, it could shake the markets. If polls reveal that Trump is gaining on Clinton, there could be a negative response from the markets since analysts believe the markets have underpriced the possibility of a Trump win.
  • The other major factor is the outcome of the December 13-14 meeting of the Federal Reserve. If the Fed dishes out an interest rate hike, US stocks could experience an upside. But with the increased rate of interest, the easy money that has caused the indices to be driving higher could start receding and that could restrict the advantage enjoyed by the markets.
  • The Q3 earnings and guidance also need to be watched out for. Consumers still seem to be spending. In the event of earnings failing to meet the high market expectations or the guidance being unclear because of factors such as the presidential election, we could see a retreat of stocks, analysts say.

Perhaps the volatility could not be as severe as feared. Perhaps there couldn’t be a total correction. But analysts believe days having 1 to 2% moves could be expected.

It is always necessary to look ahead to how the market situation would be in the immediate future for successful online trading. With TradeZero’s advanced trading software, you can do just that. Get in touch with us at +1 954-944-3885, or email us at support@tradezero.co.

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