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Thursday, February 2, 2023

S&P 500 record highs in sight following Trump tweets

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The Standard & Poor 500 Index (S&P) opened above 2,900 (up 30.34 points, 1.05%) as more information passed regarding the trade war.

US president Donald Trump tweeted he had a “very good telephone conversation with President Xi of China”.

Related: China urges Trump to avoid trade war

The markets responded accordingly with S&P reaching near all-time highs. Commodities such as crude oil and gold saw bullish sentiment as well.

crude oil vs the S&P 500 graph data

Macro data shows that crude oil tends to follow the S&P 500 movements. However, gold does not usually make gains as the oil market turns bullish. Increased interest in gold is a sign of investors protecting themselves against the decisions of the Federal Reserve meeting Wednesday, June 19th.

Gold in the year-to-date has risen 5% ($1,3448.20), levels it hasn’t reached since mid-February 2019 and April 2018 previously.

In wake of the trade war, the markets will respond negatively if no agreement is reached between the US and China. Investors believe the trade war is main reason the markets need a rate cut.

Chris Zaccarelli, CIO for Independent Investor Alliance, wrote in a research note: “If the Fed doesn’t appear sufficiently dovish – including taking the word “patient” out of their statement – or the G20 meeting doesn’t result in significant progress in the trade war with China, then the market could experience a sharp pullback.”*

Next week, Donald Trump will meet with the Chinese president at the G-20 in Japan. The Federal Reserve is expected to announce its conclusions following the meeting.

Market Performance

The Dow Jones Industrial Average rose 330 points at 26,444 while Nasdaq Composite Index increased 121 points, or 1.6% at 7,966.

The S&P is roughly 1% from reaching is historic all-time high of 2,930.

Read: G-20 discuss tactics for trade war and digital distribution

  • Details found on MorningStar
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