Trump Tariff Tantrum Again
Stocks came back from some mild morning weakness on Friday but still look like they want to pause to refresh as the on again, off again continuation of the Trump Tariff Tantrum is front page now. In the very short-term, it’s pretty easy. Closing above last week’s highs gives the bulls energy to move higher. Closing below Friday’s low means stocks could see a mild 2-3% pullback before heading to all-time highs in Q3. The seasonal trends show some weakness ahead as it is the week after option expiration with stocks in an uptrend. I believe the hat tip goes to Rob Hanna of Quantifiable Edges but I am not 100% sure.
While banks have pulled back and need to stabilize, semis are still okay but really need new highs. I keep writing about transports as they look like the next major sector to take off and lead. That’s still the case as they seem poised to run to new highs.
Bonds on the other hand, look like they have a little life, especially if they close above Friday’s high. The more the masses have become aware that rates have gone up so dramatically in absolute terms, the more I have been positive on bonds. While I continue to believe that the 35-year bull market in bonds ended in July 2016, there will be plenty of opportunities on the long side over the coming years and decades. It’s just like with stocks. While they have gone up, up, up for more than 9 years, they have been plenty of times to position for a move in the other direction.