By CCN.com: In response to the struggling stock market, Donald Trump’s Twitter feed was awash with positive talk about the trade war and progress with China on Sunday. A more upbeat Trump could be precisely what the doctor ordered for bruised markets, putting the wind at the S&P 500’s back next week. U.S. stock futures opened higher Sunday evening, suggesting a bright open on Monday morning in New York.
It has been all concessions from the U.S. administration since markets took a deep dive on Wednesday. The delaying of tariffs combined with these latest tweets could certainly help spark some buying in a stock market that has proven impressively resilient over the last few days.
The S&P 500 is still well above the 200-day moving average, forming a clear line of support on the daily chart. Appetite to buy dips in risk assets is still evident, even as chatter about an inverted yield curve echoes around wall street.
Sunday also saw one of Trump’s top economic advisers, Larry Kudlow, assuring investors on national television that there was no reason to think that a recession was coming in the U.S.
“There’s no recession coming . . . the pessimists are wrong. It’s not going to happen. We’re doing pretty darn well in my judgment. Let’s not be afraid of optimism.”
While many (including the interviewer) are quick to remind Kudlow of his similar prediction right before the 2008 recession, his confidence, in this case, may be well-founded. A healthy consumer is at the heart of the U.S. expansion, but there is a more fundamental explanation. Namely, that the president’s plan has always been to make concessions, secure some trade deal with China, and set the S&P 500 loose in 2020.
Without the trade war, there is no question that the U.S. stock market is probably the most attractive place to own equities. With Germany’s economy heading into recession, likely dragging the rest of the Eurozone with it, there is certainly little case for moving back into Euro assets. The U.S. president knows this, and it puts a floor underneath the S&P 500, which allows him to aggressively pursue talks with China without triggering the collapse it probably would in any other nation.
Trump has always used the S&P 500 as a gauge of how hard to push things with China. Stock market bulls may have had their confidence restored that the president is still market-friendly and will dial back his rhetoric to support equities when needed.
Last modified: September 23, 2020 12:54 PM