The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Enthusiasm.
President Trump suggested that US/China trade disputes would come to a positive resolution when he and Xi Jinping meet in South Korea later this week. The mood of markets shifted towards risk-on and moods only improved as the day progressed. Asian markets rallied significantly last night. Europe rallied modestly this morning. We rallied strongly today. Mag 7 and megacaps led the S&P 500 to another all-time high. Capital flow was a touch elevated at 103%.
The US/China trade news is certainly good. Hopefully the announcement of the actual agreement doesn’t disappoint. It’s unknowable what the market currently expects from an agreement. Is the market expecting normalized tariffs on China, or just less punitive tariffs, or a zero-tariff arrangement? The equity mood is so elevated, it wouldn’t surprise me if investors are speculating on a free-trade miracle.
Before we learn the US/China trade details, we’ll get the Fed decision and the earnings results from 5 of the Mag 7. Those are key catalysts for the market but we also will get earnings reports from another 167 stocks in the S&P 500.
That number of corporate announcements make this week the biggest of earnings season, even setting the Mag 7 stocks aside. We’re going to get a whole lot of fundamentally-driven single stock action. If there will be a narrative of the health of the stock market *outside the Mag 7,* it will form this week and it will form without fanfare. It is likely that that the health of the rest of the market goes under the radar this week.
I will share my stats when they come in, both fundamental and stock-performance.
Whether *the rest* of the market is doing well or poorly, it probably won’t change the fate of the index. That rests in the hands of the Fed and the Mag 7. Perhaps it can tell us whether this market is wholly supported by the Mag 7 or simply led by them.
That’s a big difference. I think you can make asset allocation weighting decisions based on that conclusion.
See you tomorrow.
-Mike
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