The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Less worried.
The tariff talk seemed to be less scary over the weekend and today. President Trump talked about exemptions, and while he also specified that nobody would be getting around tariffs, the market took everything in and decided that the whole kit and kaboodle was a net positive for stocks. The S&P 500 opened up about 80 points, gave it all back by lunch and then recovered almost all of it in the afternoon. Obviously intraday momentum players had a day. The stock market simply feels better about the state of the world and looks at last week as the sentimental bottom. Treasury yields fell significantly today so bonds attracted buyers too. Capital flow was light at 90%.
Even though the moves today were significant, the news was pretty unremarkable. The tariff talk almost always is mixed. There’s little clarity in the talk itself and so the market is left to figure out what the net effect of all the bluster might be. Today that evaluation was more optimistic. The stock market vibe is that investors were so pessimistic last week, the only *sentimental* direction we can go is towards the positive. This assumes no material bad news around the corner. For the time being, the stock market thinks things are *sentimentally* on the mend.
Notice that we’re focusing on midset right now. Nobody knows how significantly the tariff talk will actually change the economic data. That data won’t show up for a while either, we think. So from now until the data starts printing, we’re playing a mindset game in the market. Last week was dire. We stepped back from the brink and have had a weekend to catch our breath. President Trump didn’t whack the market over he head with tariff talk again so investors are perceiving parting clouds and hints of sunshine.
Is that warranted? I think it’s a bit optimistic but we won’t get a reality check for a while, so the game afoot isn’t about whether perceptions are in line with reality. The game is where perceptions are going to be tomorrow. Most investors think other investors will keep feeling better. So here we go.
I wonder how long that will last. If the tape runs quickly higher, we’ll have technical considerations. 5600 and 5754 are likely strong resistance levels that won’t break just because the market thinks last week was an emotional bottom.
See you tomorrow.
-Mike
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