Stock market experts know that efficient stock trading involves adopting a flexible strategy so you can keep yourself from being tossed around by various things that happen.
The Scenario as Summer Approaches
As summer approaches, the US economy has reduced unemployment rates, which is at 268,000 - below the 275,000 forecasted figure for the May 21-ending week. Other information such as jobless claims data, pending home sales data and retail sales data do indicate that the economy is recovering as we head to the 2nd half of 2016. But one should remember that volatility often characterizes summer months. What’s more, November is also when the US elections are to be held and there is a rate hike to be expected.
It’s still in our mind that the past two months have been up and down globally. Fears about the recession have subsided, but manufacturing continues to grow sluggishly and the US economy is trying hard to grind higher.
Bracing for Rate Hikes
For the summer, it is important for investors to brace for rate hikes while moving towards overweight equities, chiefly in the value oriented ones.
- Traders and investors must also look for greater exposure towards sectors that can benefit from rate hikes, and avoid high yielding plays. These include REITs since they aren’t in a particularly winning situation, regardless of what the Fed policy is.
- Blue chip companies such as Johnson & Johnson (JNJ) and General Motors (GM) as well as badly affected airlines must be considered. The energy sector is also rebounding so you could consider Chevron Group (CVX) and Haliburton Co (HAL) to improve your exposure to this sector.
- Investors should look for safe and low yielding credit through municipal or government bonds or corporate bonds having good coupons. Using a VIX tracker instrument would be helpful to ensure your summer portfolio is hedged a bit towards volatility.
This kind of advice comes from a deep understanding of the market and experience in trading stocks all through the year. With TradeZero, you are offered advanced trading software that is compatible on your laptop as well as mobile phone, so you have powerful tools when you carry out online trading.
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