The 90 day tariff hiatus has led to a joyous bounce for stocks. We are now half way between the lows and the highs which is a nice balancing act.
I sense there is no resistance for more upside til we hit the 200 day moving average for the S&P 500 (SPY) at 5,748. Or the next round of serious tariff headlines starts flowing.
We will dig into those possibilities in the commentary below to set the stage for a refinement of our trading plan.
Market Outlook
The 2 best things that have happened since the 90 day hiatus was announced was first the comments from Treasury Secretary Bessent last week when he talked about “de-escalation” with China. He added in other statements like both sides know that the current course is untenable.
The next best thing was the interview of Trump by Time magazine where he says they have hammered out many deals already. The expectation is that they will be announcing in coming days.
This is all quite bullish except for the fact it is unlikely to go as smoothly as it sounds.
China will not go quietly into that good night. They feel highly insulted by the way tariffs were rolled out and will want some form of public apology before agreeing to more reasonable trade terms. That is unlikely to go smoothly either. But is quite likely to end up more favorably than it is now.
Directionally things are going positive. And investors are once again getting more used to Trumps negotiating style as they did back in 2018/2019. That time period first resulted in a nasty correction followed by healthy resumption of the bull market.
There is a full slate of economic data in coming days that could indeed have market moving impact such as:
4/30 Q1 GDP: This is predicted to be close to 0% growth. Some models show it -2 to -3% because of the massive importing of gold this quarter which is technically a drag on GDP. So there is great headline risk if we are well into negative territory sparking increased odds of recession. On the hand, a better than expected reading could have us bolting higher.
4/30 PCE: This is the Fed’s favorite inflation gauge which is currently expected to move lower. Many eyes will be fixed on the results.
5/1 ISM Manufacturing: Last time was a contractionary 49 and it is expected to get worse around 48. Manufacturing is often considered the “canary in the coalmine” for the entire US economy. Thus, if much worse than expected it would most certainly increase odds of recession.
5/2 Government Employment Situation: Negative GDP is only 1 part of the recessionary cookbook. The other part is that you need job loss. That is unlikely to happen in this report. However, any weakening of job adds could spook some investors that job loss is on the way.
5/5 ISM Services: This was teetering on contraction last month at 50.8. Any further weakening is not welcome.
Now let’s imagine that these reports come in woefully negative on the current state of the economy. There are 2 possible ways that may be overlooked without much, if any, market downside.
First, is the idea that is a picture of the past given the state of tariffs. If that improves with new deals rolling out, then investors will be more focused on that optimistic view of the future.
Second, is that any weakening of the economy eases inflationary concerns and increases the odds that the Fed will soon act with lower rates. That would be obviously be seen as a positive catalyst for the economy and stock market.
Yes, it’s all quite confusing.
However, I do believe that the recent bounce and optimistic streak has solid basis. Especially if we believe that Trump is just doing a bigger version of the 2018/2019 trade policy playbook which will end much more reasonably than it started.
I still think a dose of caution is warranted given the risks in hand. That could be cash or inverse ETFs to have less exposure to potential downside if recession risk grows larger.
But by and large I am prepared to get more bullish with any serious break above the 200 day moving average at 5,748.
What To Do Next?
The 2 new trades are reserved for Reitmeister Total Return members. That also includes other hand picked recommendations for the current market environment:
- 8 stocks to buy
- 1 stock to short
- 1 inverse ETF to buy
- 2 bond ETFs to buy
All the stocks have been selected using the proven outperformance that comes from our POWR Ratings stock selection model which has done 4X better than the S&P 500 since 1999.
Now add in my 44 years of investing experience seeing bull markets...bear markets...and everything between. This helps me pick the right stocks and ETFs for the current environment.
If you are curious to learn more, and want to see my current 12 recommendations, then please click the link below to get started now.
Steve Reitmeister’s Trading Plan & Top 12 Recommendations >
Wishing you a world of investment success!
SPY shares were trading at $554.57 per share on Tuesday afternoon, up $3.72 (+0.68%). Year-to-date, SPY has declined -5.09%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
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