Recently, the market has sold off. Many people were in panic mode about tariffs and the yield curve inversion. We even wrote an article about why the yield inversion is important. Since then, a few things have happened that are positive for the stock market.
On Friday after the market closed (August 16th), news came out about Trump removing some tariffs that he put on China (click the picture below to view the article or click this link).
Also, the U.S gave Huawei a 90 day extension to buy from American suppliers. Here's the link to that article from reuters. (https://www.reuters.com/article/us-huawei-tech-usa-license-exclusive/exclusive-us-set-to-give-huawei-another-90-days-to-buy-from-american-suppliers-sources-idUSKCN1V701U)
Both of these pieces of news are positive for the stock market. Trump easing on tariffs and the U.S reasoning with Huawei removes fear from the market that was created by the trade war tensions.
Also, there are rumours that more stimulus will be coming soon (we believe there will be more stimulus and rate cuts as well). This caused the stock market to rally by the end of the week. Fear being removed from the market can be seen through the action in the bond market and precious metals as well. Bond yields went up causing them to slightly come out of their inverted state, and precious metals went down a bit as well.
In the short-term, stocks will rally and should rally this coming week as well on this news. The market loves easy money, and they are going to get more of it while being fearless of what could possibly go wrong. Trump and the FED continually show that they are going to do everything it takes to keep the stock market high for as long as possible. We outlined this in one of our blog posts titled Fed Cuts Rates - What to Expect Going Forward
Precious metals are very likely to sell off in the short-term (long-term trend is higher) and bonds are likely to sell off this week since there is less fear in the market.
Important Level to Watch This Week in the S&P 500
The S&P 500 has tried to breach the 2930-2940 level multiple times and has failed to do so. This news should be able to eventually push the SPX above that level, although it is still important to keep an eye on it to see if it fails to pass 2940 again. If it convincingly breaks out, $3000 could be the next target.