FX.co ★ Five factors that may stop rally of US stock indices

Rise of key rates by US Fed

Analysts suppose that the US Fed is unlikely to raise the key interest rate in 2020-2021. However, if the regulator makes such a decision, the US stock market will be the first to receive the blow. The fact is that low rates cause a lot of risks thus pushing investors to pump money into shares of large companies. At the moment, market participants mostly prefer to invest funds in the shares of such high-tech companies as Amazon, Apple, and some others. Funds are also accumulated in such spheres as the housing market, digital entertainment, and consumer goods.

Sell-off of shares of largest tech companies

A massive sell-off of securities of high-tech companies, leading banks and corporations as well as organizations specialized in industry and other important sectors of the economy poses a significant threat to the US stock market. Economists suppose that the sell-off could be triggered by a surge in interest rates and geopolitical factors, including a new round of the US-China conflict.

Slowdown in US economic recovery

If the US economic growth stagnates, the country’s stock market may be seriously affected. A rise in the number of private home sales is the main sign of economic revival. A jump in sales has boosted markets for home appliances and building materials. As a result, some sectors of the US economy are nearly prospering. At the same time, investors are putting in shares of railway and automobile companies. Thus, amid the stock market’s optimism, the Dow Jones Transportation Average advanced by 2.6% whereas shares of one of the largest transportation logistics companies JB Hunt Transport Services gained almost 10%. However, FedEx, a delivery corporation, showed the best performance as its shares skyrocketed by 30.6%.

Lawsuits related to US presidential election

Most analysts are sure that the upcoming presidential elections that are scheduled to be held on November 3 will be accompanied by a bitter battle. Current US President Donald Trump will hardly leave his post without a fight. In case of defeat, he will surely defend his rights in court. In case of a recount of votes and Trump’s success in an attempt to achieve victory through the court, the US economy will find itself in an alarming situation. As a result, stock markets may sink to the bottom.

Surge in oil prices

Soaring oil prices may also negatively affect the US stock market. Most countries, including Saudi Arabia and Russia, as well as US shale companies, are interested in high oil prices. However, a sharp and unexpected jump in quotes may knock out the US economy that has just started to revive. A similar situation took place in 2008 when oil prices spiked. However, analysts suppose that this scenario is hardly possible.