‘If you ask me if it’s worth buying US securities, the answer is rather negative’

09:00, 12.03.2024

Amazon, Goldman Sachs Group and Coca-Cola

The US stock market continues to climb to new heights. In mid-February, the S&P 500 index managed to close above 5,000 points for the first time in history, and the NASDAQ also came as close as possible to a new level. The indicators are supported by both the positive reporting of a number of companies and the growth of shares of IT giants against the background of the ongoing boom in the field of artificial intelligence. Simultaneously with the growth of the market, anxiety is also growing — some experts warn of a “bubble” in the securities of the IT sector.

“According to Bloomberg data, the average expected value for the S&P 500 index is going to be 4,867 by the end of the year. We expect the index to grow to 5,170 points," Mikhail Stepanyan, a stock market strategist at Freedom Finance Global, forecasts. “Top five securities: Amazon, Goldman Sachs Group, Coca-Cola, Taiwan Semiconductor Manufacturing, Novo Nordisk A/S Sponsored.” Among the promising industries, the expert highlights communications, healthcare, durable goods, as well as IT.

Natalia Malykh, the head of the Stock Analysis Department at Finam Financial Group, expects a correction in the American market this year, rather than growth.

“Triggers are weak tech reports (30% of the capitalisation of the S&P 500), deterioration of macro data, the expansion of the domestic political crisis, especially in the election year, budget problems, rising debt and interest on it (in the fourth quarter of 2023, interest expenses on servicing the national debt reached $1.025 trillion, or 3.7% of GDP) and, of course, geopolitics with interruptions in logistics," lists Natalia Malykh.

“Alas, the risks of blocking have not gone away”

“If you ask me whether or not it is worth buying US securities, then the answer is rather negative, provided that you do not have a passport from another country and there is no way to safely invest your funds," says Ilya Radchenko, an economist, qualified investor, stock market consultant. “Alas, the risks of blocking have not gone away, and there is no understanding when “everything will get better” either. So far, this is the reality.”

“Based on the mostly sad experience of several of my portfolio clients, especially those who have subscribed to Interactive Brokers and Saxo, I cannot consider the risk of blockages in the event of new sanctions and the preservation of old ones acceptable and, most importantly, predictable," agrees Vladimir Rozhanskovsky, the managing director of Trade123.

Rozhanskovsky does not recommend opening brokerage accounts with foreign brokers, having only a Russian passport, even if the investor is currently a confirmed resident of another country. “Someday everything will fall into place, but not in the near future," he believes.

Nevertheless, Alexey Berbenitsky, the director for development at Finam, notes that sanctions are imposed mainly against financial organisations and some individuals. “Individuals from the Russian Federation who invested in the US markets directly, not through Russian trading platforms, were not affected by the blocking of funds," says Berbenitsky. “Now there are certain difficulties with the routes of replenishment of brokerage accounts and obtaining market data, but otherwise private investors have not suffered and continue to invest.”

Roman Blinov, a senior trader at RUSS-INVEST IC, believes that investing in US stocks is possible only if you are a real non-resident of the Russian Federation.

“If you can prove the origin of all your money, prove a bunch of stuff and outright tough stuff, they may open an account for you. Does it make sense? If we take into account the fact of obtaining not only dual citizenship, but also the subsequent renunciation of Russian, then, probably, yes. Otherwise, no. The cheapest markets are Russian and Chinese after the fall of last year. The most promising market is India.”

Today, Russian investors continue to receive dividends on American securities purchased before the sanctions imposed, but with great difficulty, Blinov says.

“Not so long ago, I received stuck dividends from securities that I sold a long time ago! So dividends are probably coming," Ilya Radchenko confirms. But the risks are very high now, he believes.

“What seemed like a good option or a loophole until recently is gradually being covered up, and this can happen suddenly and painfully. Here it is necessary to decide whether such a risk is worth it or it is better to wait out the turbulent times in a safe jurisdiction," he advises.

Biotechnology, pharma and AI

If you really want to take a chance, Natalia Malykh recommends the American biotech company Regeneron because of its ambitious experimental line and positive expectations for key commercialised drugs, as well as the shares of the American pharmaceutical giant Merck — Keytruda's key blockbuster became the best-selling medicine in the world in 2023.

Malykh also advises to take a closer look at Visa: fears about the global recession have not been justified, and global economic activity will continue to grow, and this will support spending by consumers and businesses on cards. Alphabet, which implements advanced AI technologies, also looks interesting.

Natalia highlights Chevron shares in the US oil industry. American oil companies, unlike Russian ones, are not forced to cut production as part of the OPEC+ deal, but benefit from the subsequent increase in oil prices, Malykh notes. Coca-Cola annually expands its sales geography and product portfolio. McDonald's shares also have growth potential. The main driver of growth in 2024 will be the expansion of the network in China and the recovery of sales in the United States.

“One of the interesting companies is AMD," says Ilya Radchenko. “The AMD Instinct MI300X accelerator is used by Microsoft, Meta, Oracle, Dell Hewlett Packard, Lenovo, ASUS and Gigabyte. These are just some of the enterprise customers, and Ryzen processors are currently used in more than 90% of AI-enabled computers on the market. The company bets on the development of chips and really wants to take part of the market from Nvidia, besides, the market itself will grow at a faster pace. AMD has announced that the AI chip market is going to reach $400 billion already in 2027.”

“American stocks are expensive, but Chinese stocks may be interesting”

Roman Blinov advises investors to reorient themselves to the Chinese stock market. According to him, the Chinese market is very interesting today.

Natalia Malykh notes that Hong Kong may be of interest for medium-term speculation. “American stocks are already expensive, and Chinese stocks may be interesting for a 20-30% rebound. Things are not so bad in the economy there, as the “independent” Western press writes, especially against the background of GDP growth of about 5%. There are, of course, isolated problems in the form of the real estate market, but overall things are going well, especially against the background of Europe and Japan.”

“The fall in the stock market obviously does not suit Beijing, because, firstly, it depresses home investors who have accumulated paper losses, and secondly, derivatives valuation is linked to some stocks and indices, which is a risk to the national financial system," Malykh comments. “However, I would not count on a return to the peaks of 2021 yet because of geopolitics.”

Yulia Garaeva