Investors were afraid a recession was starting to form in Q1 with signs of potentially disastrous GDP contraction. In the end it turned out to only be a mild -0.3% pullback with signs of things improving ahead.
Yet as of today the famed GDPNow model from the Atlanta Fed is sporting a +4.6% read for Q2 after a slew of above expectation economic reports.
Does that mean disaster averted?
No. Tariffs could still take a toll on the economy down the road if not resolved in timely or positive fashion. But more and more that is looking like it will be handled without undue harm to the economy.
What does that mean for the market as we move forward?
That will be the focus of today’s Reitmeister Total Return commentary.
Market Outlook
Here is the short and sweet story.
Continuation of the long term bull market is the most likely outcome. However, we have bounced enough from the April lows for investors to be in a holding pattern to see what happens next.
If tariffs negotiations continue to roll ahead in positive fashion, then investors will be ready for the next bull run springing us over 6,000 and ready for new highs above 6,147 for the S&P 500.
If things go sour on that front with negotiations...or new tariffs prove inflationary, then the odds of recession will increase forcing investors to sell stocks. That might mean a retest of the April lows around 4,800.
Worst case scenario is things go horribly wrong with tariffs spurring a recession. In that case we are likely talking more about 4,000 bottom for the S&P 500.
Gladly that is not as likely as Trump replaying the 2018/19 trade war script where original tensions gave way to much more reasonable accommodations. In that scenario the economy continues to grow and the bull market marches higher.
Most investors are banking on this bullish outcome. That is why every recent sell off has been shallow and short lived.
Yet even with that being the case, you should expect a trading range between the 200 day moving average at 5,790 and 6,000 for the time being. The sooner we get the answer on tariffs...the sooner that trade range gives way to the next big move for stocks.
Hopefully that is higher. But if not, we will be prepared to get more defensive with our portfolio.
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SPY shares were trading at $596.09 per share on Tuesday afternoon, up $3.38 (+0.57%). Year-to-date, SPY has gained 2.01%, 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.
Has the Bull Market Run Out of Steam? StockNews.com
