S&P 500 Hits Record High After US-China Trade Ceasefire

It was a big stock market news on Monday when the U.S. stocks surged high led by the momentum exuded by the U.S. and China understanding to hold off additional tariffs and concentrate on talks to resolve the trade conflict.

Notable has been the phenomenal surge in S&P 500 index to a record high on Monday as Wall Street celebrated the trade truce between President Donald Trump and China President Xi Jinping during the G 20 summit in Japan.

In terms of stock market analysis, the S&P 500 zoomed 0.8 percent and hit an intraday high record of 2,977.93. The Dow Jones Industrial Average jumped 0.4 percent to end the day from the outperformed stocks of Nike and Apple.

The Nasdaq Composite jumped 1.1 percent and maintained a four-day winning streak.

Monday’s gains gave Wall Street the best right foot to enter the second half of the year. Looking back, the S&P 500 had the best first half in more than 20 years. It rallied more than 17 percent in the first half of 2019.

After the torrid May, stocks zoomed in June. The Dow surged 7.2 percent in June and clocked the biggest gain in any June since 1938. The S&P 500 jumped 7.9 percent in June and was best June performance since 1955.

Outlook on equity markets for the second half

What experts think in terms of the outlook for the second half of the trading year and the catalysts that could dictate the markets in the months to come are examined below.

Gene Goldman, chief investment officer at Catera Investment Management sees three things influencing the markets and pushing volatility into the equity markets.

Number one is the economic data that is starting to cool and second is valuations that are a bit elevated. But earnings growth is weakening. The third is the bond market where an inverted yield curve suggests a weaker growth ahead.

“All this is going to create a lot of market volatility,” he added.

Steven Wieting, chief investment strategist at Citi Private Bank expects the trade truce would lift corporate earnings.

In his view, if the economy finds some anchoring and trade issues are put behind then the Federal Reserve will not bother to cut rate.

Jason Hunter, head of global fixed income at J.P. Morgan wanted the economy to repeat the performance in the late fourth quarter and first quarter this year to sustain the stock market rally.

Why China needs a trade deal?

Barry Knapp, managing partner at Ironsides Macroeconomics expects a good second half to the year. But “risks still remain on the upside. I think we’ll have a pretty decent second half.”

Knapp says a couple of things that happened in the past few weeks hastened the U.S-China trade détente. One was the weaker Chinese data two weeks ago and had a disturbing composition for China.

So far China’s strength has been industrial production limited to heavy industries that are state-owned enterprises. But now they have cut individual tax rates and are looking to explode credit into SME’s or small medium enterprises. “But they are having no success with that whatsoever. “

The latest PMI showed orders for small-medium businesses are close to 45 and there are no signs of an uptick to a higher level.

That means China too needs a deal to reform the economy. The latest data strengthened the hands of the reformers. “We’ll get some sort of a deal with China undoubtedly,” Knapp reasoned.

Jason Draho, head of the asset allocation for UBS Wealth Management sees economic data that will spur the Fed and drive the markets.

“What the markets are going to begin to immediately focus on going forward is the economic data. For the next term, it’s really the growth and Fed outlook that’s going to drive the markets,” added Draho.