Trade Optimism and Easy Money Set to Drive Stocks to Fresh Record Highs

The bull story for the rest of the year remains in place as trade war angst ebbs, the stimulative effect from lower rates kicks in, the US consumer remains resilient and credit markets show money is still available. The S&P 500 could rally another 3-5% as long as we don’t see a policy mistake by the Fed and a complete collapse in trade war.

As we approach earnings season, the consensus is likely to see stocks deliver hardly any earnings growth over the next 12 months, with a strong economic recovery seeing 12% gains, and recession led collapse seeing 15% drop. With the trade war lingering longer than most have expected, business investment is continued to remain stagnant. If we start to see a lot of pre-announcements over the next couple of weeks, we could see limited downside with US equities.

Over the past several trading days, cyclicals have been playing catchup as banks, retail, transports and energy all rallied strongly. They key to the next leg higher will depend on industrials and technology, thus re-emphaszing the importance of a substantial de-escalation in tariffs or even an interim trade deal.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya