Why New All-Time Highs Could Be Around the Corner
On April 2, I told readers that there’s a big difference between promises and outcomes…
That’s especially true in the world of politics. And we’ve just seen that come to fruition.
As you’ve no doubt heard by now, President Donald Trump’s administration talked with China’s top brass. Together, they hammered out an agreement to slash tariffs. And both sides hope to keep up the talks in the months ahead.
With the agreement, the effective tariff rate on Chinese imports came down to 30%. That’s not far from where it started.
Now, some folks in the media might be saying the trade war is over. But as we all know, the tariff situation can evolve quickly. And we can’t be certain where things will end up a few months from now.
Either way, the agreement at least marks a big “pause” in the trade war. And the markets cheered on the result. The S&P 500 Index surged more than 3% yesterday.
I want you to remember this. I’m serious – write it down.
You should have a journal where you keep notes on your investing journey. And you definitely should remind yourself that in recent months, investor sentiment had been as bad as it gets.
According to that measure, investors were pricing in the end of the economic world. But of course, everyone wants to know what’s next…
I Expect New Highs Ahead
Now, in my April 2 essay, I told readers that political brinkmanship can often be overblown. After all, it’s in politicians’ nature to make huge promises or declarations and then walk them back.
Again, there’s a difference between promises and outcomes. And the data supports that.
It doesn’t take a crystal ball to know that political leaders most likely won’t run the world off the proverbial cliff. That’s not in their interest.
Do they make decisions that you don’t like? Sure. That’s true no matter what side of the aisle you might be on. But when the crowd experiences extreme emotions, they’re often on the wrong side of the trade.
So I’m sure the big question on everyone’s mind is… What’s next?
Well, as regular readers know, we measure the broad market in the Power Gauge with the SPDR S&P 500 Fund (SPY).
The fund currently has a “bullish” rating. And right now, 117 individual stocks in SPY earn a “bullish” or better overall grade. I also expect that further opportunities will open up as the “smart money” on Wall Street and individual investors grow less risk-adverse.
Put simply, trade tensions dialing down means that investors can go back to doing what they like to do – focusing on opportunity.
Now, don’t let that fool you into thinking that the coming weeks are going to be free from volatility…
Emotions are still running high. And there’s no question that at the slightest sign of trouble, investors will panic again.
But overall, I expect the broad market to continue moving higher.
We’ll likely see the narrative shift back to artificial intelligence (“AI”) and tech stocks. And the businesses that raised prices but managed to weather the trade-war storm could be in for a strong earnings season in the coming months.
So be prepared for continued volatility on the way to new highs in the markets.
Now is the time to find the strongest opportunities. Make sure that you’re aligned with them.
Good investing,
Vic Lederman
This article was originally published on this site
