With the announcement of President Trump for signing a temporary ending of the government partial shutdown, US markets rose to a level setting for a future breakthrough next week. In fact, global markets have slowly turned from a bearish trending at the end of 2018 to become a recovery since the beginning of the year 2019. S&P 500 has since gained more than 13% to 2,664.76 from its low of 2,351.10 at December 24th, 2018. China markets represented by Hang Seng has also recovered almost 10% from its low of 25,964.36 on January 3rd 2019 to 27,551.85 at last Friday Closed.
Hang Seng market has a beautiful run up just last week alone for 2.5% gain as one of the most beautiful global market winners for the week. These markets ran up were propelled by several reasons. The most important one is the optimistic view of a trade dispute resolution between US and China when Trump announced positive steps were taken by both sides. The second reason would possibly be the lack of negative data indicating an imminent economic recession. The recent stable US economic data has stabilized investors’ nerves.
And the third reason is also the Fed has also announced a willingness to be flexible with rate hike in 2019. Investors basically took a clue that there will be less or even no more rate hike in 2019.
Precaution on a Trade Deal
On the flip side, pessimistic analyst take precaution that investors could have been reading too much into Trump’s word. Though Chinese leaders were keen to have a deal with the US through their efforts and steps taken, however, there were still too far from anything near to Trump’s desire of his dream deal.
There are still lack of any concrete decision made on papers from both side and there were still rumors of talk breakdown from time to time even though high official quickly denied those rumors. For the US side, Trump wishes to twist Xi’s arm to let China businesses run privately like the Western counterparts without the unfair support from government.
While China, on the other hand, takes pride of the way how businesses run in China as a new business model. Chinese leaders were once said publicly that the rest of the third world should follow Chinese business model instead of the Western model. This show how difficult the two sides can ever reach a deal unless either side compromises. It remains only one more month before the talk deadline. Anything can happen between this month’s duration while the talk is still on going.
Next Market Catalyst
In the short term, US market is in the midst of earning report seasons. There will be some major corporate earnings report coming out next week including Apple, Amazon, Facebook, Microsoft, Tesla and others. These reports will be the major catalysts to move market either breaking though to higher ground or back down to where they were before the rise.
At this juncture, investors need positive reports to propel a breakthrough dissolving a global economic growth slowdown outlook painted by many global economic influential leaders. Any mixed reports would most possibly not enough to calm investors’ nerves of a negative future outlook.
Interesting to note that, while report of China slowdown was out recently, but investors have basically ignored the elephant in the room. They took great risk in pushing market indexes up against the reality in the hope of exchanging a trade deal with the US.
While looking at the chart, most chartist would expect a positive move next week for the global market unless something unexpected shoot up from nowhere. Positive fundamentalist would also agree that market will resume a bullish run because there is still nothing strong enough to deter it. What will happen the most is a temporary pause or pull back. Because the economic fundamental is still intact and strong.
However, in reality, only time can tell. Let’s keep watch when corporate earnings report coming up next week.
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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions. This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to conclude individual decision.