While Alibaba is up 4.8%, the Trade Desk, JD.com, and Roku have gained 6%, 5.6%, and 4.9%, respectively, as of the time of this writing. In comparison, the Dow Jones Industrial Average has gained 1.63%, or 431 points, and the S&P 500 is up 1.6%.
Tech ETFs XLK, SMH, SOXX are up 1.8%, 2.63%, and 2.7%, respectively. Apple reached a record high today, while other tech giants Microsoft and Amazon also gained in early market trading.
Chinese stocks have been volatile since the trade war started
Chinese stocks Alibaba, JD.com, and Baidu were trading lower earlier this month after reports that the US government might look to limit investments in China. The blacklisting of 28 Chinese companies this week also created panic among investors.
But now President Trump and China’s Vice Premier Liu He are engaged in a two-day trade talk that’s driving stock momentum higher. Though Alibaba, JD.com, and Baidu have gained market value today, they’re still trading considerably lower than their all-time highs.
Alibaba’s all-time high
Alibaba is trading 16% below its all-time high, while this figure stands at 40% for JD.com. Baidu and Sina are trading 62% and 66% lower than their all-time highs, respectively. Chinese stocks still have some upside potential, according to analysts.
Alibaba is trading at a discount of 29% to analysts’ average estimate. JD.com, Baidu, and Sina are trading 19.4%, 40%, and 42% below their 12-month average target estimates, respectively.
Will the Trade Desk and Roku rise in the fourth quarter?
High-growth stocks such as the Trade Desk and Roku experienced a market sell-off in September due to concerns over high valuation. The Trade Desk is trading 31% below its 52-week high, while Roku is trading 30% below its record high.
We identified Roku as a good pick earlier this month, and the stock has already gained close to 23% in October 2019. Roku was also part of Five Stocks to Buy at Major Dips. Now, driven by the pullback last month, the Trade Desk is trading 39% below the average estimate. This figure stands at 10% for Roku.
While tech stocks are driving the markets today, this optimism might well be short-lived. Markets might move lower if trade talks reach a standstill or if they escalate quickly. While an end to the trade war will give investors a temporary breather, several macroeconomic concerns remain.
The purchasing managers’ index data for the US and Europe is far from encouraging. The yield curve also inverted in August, and recession calls are growing louder by the day. There are several reasons to believe this is the end of an emphatic bull run that’s lasted for over ten years since the markets bottomed out in 2009.