Tiger Brokers is a global brokerage platform that offers Australian investors easy access to ASX and US stocks. Listed on the Nasdaq, the Australian division of the trading group is offering zero brokerage on US stocks and ASX stocks for the first 3 months.
Global equities often outperform in April, and there have been strong returns so far this month after markets staged an impressive rally in March.
Although the Russian-Ukrainian war wreaked havoc on commodity markets, it also contributed to the complex inflation outlook that investors continue to grapple with as the world emerges from the pandemic.
In March, US interest rates rose for the first time since 2018. But overall, stocks are holding up well against the prospect of tighter monetary policy.
And that’s partly a byproduct of the link between inflation and underlying economic health, which in turn affects company fundamentals, said Michael McCarthy, chief strategy officer at Tiger Brokers.
“Strong growth rates across the economy are good news for business results,” McCarthy said.
“That’s why most historical studies show that stock markets rise during the first part of an interest rate hike cycle, and this honeymoon phase can last up to two years,” once rates start to rise.
So even though financial conditions have started to tighten, that doesn’t mean good companies can’t still outperform.
What were the top 10 most traded US stocks on Tiger Brokers globally last week?
- TO INPUT
However, while higher rates don’t necessarily mean “selling everything,” the investment landscape may also become more complex now that policymakers have the task of containing inflation.
“Investors should expect that at some point the effects of rising interest rates will be felt and equity markets will be increasingly vulnerable to correction as central banks tighten. monetary conditions,” McCarthy said.
But for now, the ‘buy the dip’ mentality “is still deeply embedded in investor success since the global equity low of 2009,” he added.
“Equity investors seem focused on the positives of the economic recovery, which means further gains during 2022 are likely.”
What were the top 10 most traded US stock options on Tiger Brokers globally last week?
- TO SPY
Longer term, McCarthy said investors should always be wary of the impact on valuations of high-growth tech stocks caused by sustainably higher interest rates.
“If growth forecasts are revised down, the impact on valuations for this group is very significant,” he said.
“The next bear market in equities depends on the behavior of new individual investors.”
“That could mean the two-to-five year outlook is for a long, slow fall that feels like a balloon deflating rather than popping,” McCarthy said.
What were the top 5 most traded US ETFs on Tiger Brokers last week?
- TO SPY
Elsewhere in global markets last week, Tesla (again) made headlines when it announced it was planning another stock split, following a separate 5-to-1 split in 2020.
Apparently, stock splits don’t change a company’s fundamentals. But McCarthy said they still represent a “curious phenomenon” in the markets.
“Mathematics is foolproof. Buying 1,000 shares at $100 is exactly the same as buying 2,000 shares at $50,” he said.
“However, it can be argued that there is a psychological effect. Some investors may perceive that there is somehow less risk in buying a stock at $50 rather than $100, although this is factually incorrect.
But that hasn’t stopped stock splits from being “big news” lately, McCarthy said, especially in the United States.
“Hard-headed professional investors can argue that the gains seen in many recently-split stocks are attributable to the biggest bull market in modern times, rather than the splits themselves,” McCarthy said.
This article was developed in conjunction with Tiger Brokers, a Stockhead advertiser at the time of publication.
This article does not constitute advice on financial products. You should consider obtaining independent advice before making any financial decisions.