There have been a lot of research pieces published that point to the S&P 500 moving to 3,000 in the coming month on the back of 1. US China trade talks proving successful and tariffs fading, and 2. the US Federal Reserve and its normalization process. These points surely could give the US market a boost and especially for the tariffs, and earnings (some are looking for a boost), equity markets could roar.
However, we at Classiarius are looking for the market to realize that the deeper issues that contribute to the trade deficit will take years to address. So the S&P 500 breakout to the 2,800 then 3,000 level seems possible, but could this break higher be a great range to fade the market? i.e. pull back and wait for a breakdown?
More importantly, once we have seen the results of the so-called trade solution that Mr Trump has engineered with China does it make sense that investors start to refocus their attention on earnings fading and the global economic slowdown. If we do in fact see a global economic slowdown while the US earnings benefit disappears, a 3,000 S&P level would not be a level to establish bullish view, one would think, right?
This is a sensitive subject now, and we feel that markets will be volatile in March and could start to favor the downside. More on this topic in the coming weeks.