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Stock market and economic conditions, in general, have been improving in 2024. And investors here in the UK and US enjoyed a very important market rally. However, warnings of a stock market crash seem to be growing.
Stock valuations in the UK look reasonable. But in America, many growth stocks have resumed trading at higher valuations based on expectations of compounded growth through 2025 and beyond. And with the presidential election looming, uncertainty about monetary policy is heating up.
Harris vs. Trump
As usual, as the political situation heats up, notable investors from Wall Street have started sharing their views on what the election result means for the stock market.
Another voice that gets a lot of attention is John Paulson's. He built his reputation after successfully predicting and profiting from the 2008 financial crisis, earning the largest profits in Wall Street history – nearly $15bn.
So, his voice carries a lot of weight. So it's no surprise that concerns are rising after he announced a stock market crash if Kamala Harris wins in November. Digging into the details, his prediction is based on proposed legislation to introduce higher corporate taxes and new taxes on unrealized capital gains.
There are no investor-friendly proposals. And he worries that they could trigger a massive sell-off across various asset classes, including real estate and stocks, leading to market crashes and recessions.
Needless to say, that is quite shocking. The problem is there are similar predictions of a Trump victory. Goldman Sachs released its own forecasts showing that Trump's plans to raise international trade tariffs could cause US product prices to rise, leading to a recession.
So which predictions should investors believe?
Will the stock market crash?
Personally, I won't worry about the coming fall in stock prices, at least not in the next election. Fear of disaster is very common in the US every time there is a presidential election. However, most of the time, this concern never materializes.
But let's assume the worst and say that danger is coming regardless of the outcome in November. What can investors do?
Businesses operating in defense industries are generally not affected by political and economic decisions. After all, demand in sectors such as health care, utilities, and the consumer base generally continues to perform well regardless of who is in charge. And that makes stocks Intuitive Surgical (NASDAQ:ISRG) is very tempting.
The business is a world leader in robotic-assisted surgery with its globally distributed da Vinci technology. As a minimally invasive surgical option, patient risks and recovery times are greatly reduced. And since Intuitive Surgical makes most of its money by selling consumables like its scalpels, it's proving to be a very cash-generating business that translates into impressive share price performance.
The firm's growth is largely dependent on health insurance companies offering robotic surgery. And since it's still more expensive than regular surgery, coverage isn't always easy to find, creating barriers. But while this acquisition risk cannot be ignored, the long-term growth potential of this market makes it worth considering, in my opinion.
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