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Need to Know: Get ready for a Trump trade reboot — here’s what could set it off Need to Know: Get ready for a Trump trade reboot — here’s what could set it off
Just when, if ever, is this postelection rally going to get its second wind? It’s a question that’s been nagging at investors for weeks... Need to Know: Get ready for a Trump trade reboot — here’s what could set it off

Just when, if ever, is this postelection rally going to get its second wind?

It’s a question that’s been nagging at investors for weeks now, months after. The so-called reflation trade sent stocks higher late last year, on hopes for stimulative policies from a newly elected U.S. President Donald Trump. But lately, this market has been caught in a relentless to and fro of direction.

Fear not, our call of the day from a team of strategists at Stifel says a change is coming, though investors must be patient a little bit longer.

The postelection romp higher should recharge later this year and push all the way into the first quarter of next year, predict strategist Barry Bannister and his team. Then, look for a peak for the S&P 500

SPX, +0.31%

 after the first half of 2018.

The catalysts for that top? Progress by the new administration on tax and spending plans, which is “bad” for Wall Street because fiscal easing is a trigger for a Federal Reserve tightening, as the fed-funds rate reaches around 2%.

Bannister says while investors have been disappointed in the lack of fiscal progress by the Trump administration, one positive has been a lowered risk of a Fed going full steam ahead with rate hikes. Not only that, the effects of past stimulus have been playing a supporting role for stocks.

And using history as a guide, they offer another Fed-driven reason why the bull market isn’t over yet. In the below chart, they map out Fed rate cycles since 1982, which they say have followed a pattern and can be divided into three steps: early (green line), middle (yellow line) and late (red). In the early stage, stocks were weak, then bullish in the middle and weak again in that late period:

“We believe this rate hiking cycle is in the yellow “Middle” stage (1) and has not yet reached a bear market/recession level. We see difficulty occurring at a fed funds of about 2%, however, as the rate would then cross the red diagonal line below that often foreshadows a recession ~1 year later,” say the strategists.

Here’s their chart of the current cycle, with an arrow pointing to where Stifel thinks the market is right now — yellow (bullish, that is):

Check out: 5 ways to profit from “Trump Trade 2.0”

Key market gauges


DJIA, -0.06%

 and the S&P 500

SPX, +0.31%

 flat to higher. European

SXXP, +0.35%

stocks are having a decent day, but the FTSE 100

UKX, -0.21%

 has wiped out gains for the year as investors wait for a parliamentary vote expected to confirm an early general election in June.


GCM7, -1.19%

 is under pressure, while oil prices

CLM7, +0.17%

 are higher. The dollar

DXY, +0.32%

 is moving up, lifted by a weak Japanese yen

USDJPY, +0.64%


Read more in our Market Snapshot column.

The chart

Investors have been rotating out of U.S. stocks and into European equities, notes the latest Bank of America Merrill Lynch fund manager survey. April rotation to eurozone stocks from the U.S. was the fifth largest since 1999:

That shift came even as Europe faces an uncertain French presidential election, where a win for far-right candidate Marine Le Pen could deliver a 5% to 10% drop for equities in the region as she has been pushing for a French exit from the euro. However, it seems investors aren’t so much fearing EU disintegration anymore, notes BofAML.

See: No matter which front-runner wins the French election, it’s a revolution

The stat

Close but no cigar for Georgia’s Sixth District congressional candidate Jon Ossoff

48.6% — That’s the slice of votes Democrat Jon Ossoff got in his fight for a hotly contested House seat in Georgia late Tuesday, with two-thirds of districts reporting. But as he fell short of the required 50% majority, he’ll now face a runoff election in June against Republican rival Karen Handel.

Ossoff raised an eye-popping $8.3 million for the fight. Twitter, of course, has been weighing in in earnest.

The quote
Getty Images

“When the performance was over, all the performers and participants in the military parade broke into enthusiastic cheers of “hurrah!” — North Korea’s state-run KCNA news agency reports on a musical show marking the 105th birthday of the late grandfather of leader Kim Jong Un.

A mock-up video showed missiles blowing up the U.S. and rows of white crosses in a cemetery, reported Reuters.

The buzz

Morgan Stanley

MS, +2.81%

 and BlackRock both posted profit beats ahead of the open. EBay

EBAY, +0.43%

 is reporting after the close (check out a preview here).


IBM, -5.62%

 is posted a profit fall and has been dinging the DJIA with early losses.

21st Century Fox

FOX, -0.12%

 may be ready to let go of Fox News host Bill O’Reilly, after a string of sexual harassment allegations, CNN reported. (News Corp.

NWSA, +0.61%

  , which owns Dow Jones & Co., publisher of MarketWatch and the Wall Street Journal, and 21st Century Fox were part of the same company until 2013.)

At Facebook’s

FB, +1.04%

 annual developer conference, CEO Mark Zuckerberg talks augmented reality , which could spell curtains for a core Snap ad product. And here’s Facebook’s Messenger moneymaking plan.

Boston Fed President Eric Rosengren will speak at Bard College at noon Eastern Time, ahead of the release of the Fed’s Beige Book on economic conditions at 2 p.m. Eastern.

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