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It’s been a rocky 12 months for the S&P 500, with the US stock market going on a bit of a rollercoaster ride in April following tariff announcements. Despite this volatility, America’s flagship index has continued to head upwards, reaching new all-time highs. And subsequently, passive index investors, as well as some stock pickers, have been reaping the rewards.
So how much money have investors been making? And is it time to consider buying US stocks in June?
Crunching the numbers
For those who prefer to put their portfolios on autopilot with index funds, the last 12 months have been a relatively good time. Investors who held through the April mini-crash have gone on to earn a 12.4% return or 13.9% when including dividends. That means a £10,000 investment made in June 2024 is now worth £11,390.
That’s slightly ahead of the FTSE 100’s 10.1% achieved during the same period, making US stocks a higher-performing investment.
What about stock pickers? This number is a bit harder to work out since it ultimately depends on which stocks they decide to buy. Those snapped up shares in Deckers Outdoor Corp are likely disappointed. A combination of slower growth, conservative guidance, and a $150m expected tariff impact cost spooked a lot of investors, causing the share price to tumble by almost 40%. And now a £10,000 initial investment is only worth £6,330.
However, the story’s quite different for stock pickers who uncovered the value offered by Howmet Aerospace (NYSE:HWM). Accelerating aircraft build rates (particularly from Boeing) and a surge in new defence contracts for F-35 engine parts have supercharged profits far beyond analyst expectations. And investors who spotted this growth potential early have gone on to enjoy a stellar 103% gain, transforming £10,000 into £20,300.
Time to buy US stocks?
The macroeconomic uncertainty created by looming trade wars suggests some caution is warranted when exploring the world of US stocks. After all, many of these businesses are trading at lofty valuations that open the door to volatility. However, trying to time the market is a fool’s errand.
So instead, taking a dollar cost averaging approach is likely the most prudent. By drip feeding capital into high-quality businesses over time, investors can ensure they benefit from the bottom (if it’s already been reached) or by snapping up more shares at a better price (if the stock takes a tumble).
Given the success of Howmet, should stock pickers start their shopping spree here? Analysts at RBC Capital Markets certainly seem to think the aerospace & defence giant has more to offer, having recently hiked its share price target to $200. That’s about 19% higher than current levels. And this projection is driven by the expectation that defence contracts will continue to roll in while margins sustainably expand.
However, even a bullish consensus from RBC comes with a few caveats. The analysts have specifically highlighted the cyclicality of this sector. At the same time, new tariffs on critical metals (particularly titanium) could cause input costs to jump significantly that management might not be able to pass on to customers.
In other words, while Howmet might be a solid business, it’s not without its weak spots. Nevertheless, given the projected growth potential, it’s a US stock that’s worth further research, in my opinion.
