So much for that swoon
The S&P 500 took out the September 21 high.
It's up 1.5 points to edge out the old record with a high so far of 2942. The gain closes to the chapter on a painful squeeze lower and impressive recovery played out in two distinct one-way moves that were separated by the turn of the calendar.
The chart truly tells to story.
Years from now when people ask me what that blip was all about, I'll point to a few things:
- The Fed and other central banks got way ahead of themselves with the tightening rhetoric
- Global growth suddenly sputtered, particularly in China
- That was undoubtedly related to Trump ramping up the US-China trade war
- Trump started calling himself 'tariff man' and he was unhinged for awhile, especially in Nov-Dec and people were worried about the Mueller report. Plenty of people thought Trump had entered a death spiral.
- European growth started to sag along with some problems in Turkey and Argentina that destabilized emerging markets
Anyway, the Fed made a U-turn, Trump started talking nice about a China deal and Beijing hit the stimulus switch. So here we are.
Here is what Merrill Lynch analyst Michael Harnett is saying about stocks:
"Risk assets to rise led by "deflation winners" of credit, tech, US, all likely funded via profit-taking in EM; US$ appreciation signalling easing of global financial conditions hence global equities outside US will also likely remain bid; but only once dollar appreciation ends in late-Q2 (gold & tech will be the tells) will combination of equity inflows, global growth upside surprises & rising bond yields trigger "big top" of Wall St., in our view"
