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How to Predict the US Stock Market?

How to Predict the US Stock Market?

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Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.

First up: stock market predictions are merely estimates of possible market movements. And with the right tools, you too can get a fair idea of how the market may behave in the near future. Here are some such ways to predict the US stock market using certain key metrics.

This article covers some of the common techniques used to predict market movements, specifically to do with the US stock market.

Conduct fundamental analysis

Fundamental analysis involves studying the valuation of a stock to understand if it is overvalued, undervalued or correctly valued. The underlying principle is that over time, stock prices correct themselves and align with the stock’s value. Undervalued stocks may record price rises over the long term, while overvalued stocks may plummet.

So, fundamental analysis can help you understand how a stock could perform in the long run. This is particularly important if you are keen on investing rather than just trading over the short term. To analyse US stocks in this manner, you need to look at different metrics like the following:

Earnings per share (EPS): 

The higher the EPS, the better a company’s performance is. This may also indicate better future performance.

Price to earnings ratio (PE ratio): 

A higher PE ratio indicates that the stock is expensive, and may price correct in the future.

Price to book ratio (PB ratio): 

A lower PB ratio is preferable, because it indicates that the stock could be undervalued and may price correct favorably.

Make use of candlestick charts

Candlestick charts give you information about essential data points like the opening price, closing price, daily high and daily low for a stock. They are a key component of technical analysis, which uses part price movements to predict how stocks could perform in the near future. Unlike fundamental analysis, technical analysis is better suited for traders and short-term investors.

You can use candlestick charts to get a better idea of the stock market forecast for the next six months or over a similar shorter tenure. Technical analysis also involves the use of various other metrics like the following:

  • Simple moving averages
  • Exponential moving averages
  • Momentum indicators

Keep up with the news

While the aspects of fundamental analysis and technical analysis discussed above may be a bit confusing for beginners, there’s always a lot to be learned by simply following the news. Although news updates cannot give you any accurate estimate of exact price movements, they can help you with a little bit of stock market forecast by pointing to the general direction in which the market sentiment is headed.

For instance, if the market sentiment dipped overnight, you may find that stock prices may temporarily dip. If this sentiment continues over a longer period , it may lead to a bear market. This is one way in which you can get a fair idea of market movements and make some US stock market predictions by keeping up with the news.

Keep an eye out for recessionary patterns

Recession in the economy also impacts the stock market, and the US stock market is no exception. Since the purchasing power of the people decreases, it means they will purchase fewer goods and services. This, in turn, leads to a decrease in the revenue (and the profits) recorded by companies. As you may have guessed, decreasing profits may lead to a fall in the stock prices.

So, by keeping an eye out for any recessionary patterns in the economy, you can, to a certain extent, make broad stock market predictions. However, keep in mind that some stocks in the defensive sectors may be resistant to recessionary forces — at least to a certain extent. 

Watch what the FIIs and DIIs are doing

Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) may trade in large volumes. So, when particularly large buy or sell transactions from FIIs and DIIs happen, they may significantly influence market behavior. For instance, when FIIs and DIIs pull out from the market, they sell most or all of their holdings. This increases the supply in the market, and if there is not enough demand to match it, the market may dip temporarily. If this happens on a regular basis over a period of time, you may have an incoming bear market. 


The bottom line is that US stock market predictions (or any kind of stock market forecasts) are, at best, an estimate of what could happen. While they may be possible, the market is not accurately predictable. So, it is best to base your stock market investment decisions on research and planning rather than just predictions. If you’re looking to invest in the US stock market from India, you could try Fi Money. On Fi Money, you can invest in US stocks at zero commissions, and in real time. 

Frequently Asked Questions

Will 2023 be a good year for the stock market?

Stock market predictions are just that — predictions. With 2023 fast approaching, many experts have put out their opinions on how the coming year will be for the stock market. The opinions and predictions are quite contradictory. While some experts believe that the markets may be off to a slow start in 2023, others forecast that the coming year could be a better one for the markets than 2022.

Whatever the US stock market predictions or the general stock market forecast may be, it is best to draw up a solid investment plan and consistently invest in the markets via an SIP. This way, you eliminate the need to time the market and instead, get to spend more time in the market. 

Should I pull my money out of the stock market?

Stock market forecasts that indicate a downturn can be chaotic to your investment plans. If the stock prices are falling or if you fear a bear market may be fast approaching, it is only natural to panic and pull your money out of the stocks you’ve invested in. However, the more prudent course of action would be to remain invested, particularly if you have a long-term horizon for your investments. This is because market cycles are a common part of investing in market-linked investments, and over time, the effect of the volatility will be nullified. 

A smarter course of action than pulling your money out of the market would be to start a Systematic Investment Plan (SIP), so you can benefit from the falling prices and reduce the overall cost of your investments in the long run.

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