Apart from growth stocks, investing in stocks that yield stable dividends is another good way to make money in the market. This is true especially in the current scenario when markets have been volatile, causing investors to panic. Though, of late, markets have embarked on a “correction” course, bouts of occasional volatility still persist.
Macroeconomic Story So Far This Year
After a dismal start to the year, U.S bourses finally made some recovery in March, helped by stabilizing crude prices and FOMC’s change of stance on rate hikes. Encouraging data on manufacturing and sound jobs reports are likely to add to the indices’ good run going ahead. Manufacturing PMI for March was 51.5, a minor increase over February PMI while 215,000 jobs were added in March.
Also, in March, the S&P 500, Dow Jones and NASDAQ Composite index grew 6.6%, 7.1% and 6.8%, respectively. For the first quarter, the S&P 500 and Dow Jones were up 0.8% and 1.5% whereas the NASDAQ Composite ended the quarter in the red, down 2.8%.
However, if we dissect thoroughly the factors that have contributed to the recent gains, we come across a rather bleak picture. This raises questions about the sustenance of the recent gains in the stock markets.
There hasn’t been any miraculous recovery in oil prices, which are currently hovering around $36- $37. However, this represents a 37% gain since mid-February when crude plunged to $27 and sent shockwaves across the world. The upcoming OPEC meet (Apr 17) to consider a supply freeze, weaker-than-expected crude inventories and a fall in U.S rig counts (from 372 to 362 as per Baker Hughes, for the week ending Apr 1) have been providing some cushion to oil prices.
However, yesterday, WTI crude saw a 4% slide after Saudi Arabia said that it might agree to a production freeze only “if all countries” including Iran “agree to freeze production.” Iran has been reluctant to freeze production because it has just returned to exports after a long period of international sanctions (imposed in 2010) and is reportedly on track to increase its production by 1 million barrels of export per day. However, recently, Iran has shown interest to be a part of the meet after being reluctant earlier, but Tehran agreeing on a supply freeze looks a remote possibility.
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