Rhetoric from both sides has become increasingly positive leading many to believe that an initial deal is in the works. If the deal is finalized, or either side is able to provide more evidence of progress, the markets will likely see a substantial bump as traders will be better able to gauge future earnings expectations.
As analysts at LPL Financial put it, “Given trade uncertainty, opportunities for positive guidance from corporate America may be limited. However, that won’t stop market-watchers from trying to gauge the impact of the U.S.-China trade conflict amid a wide range of possible outcomes.”
Investors will also be watching for key economic data this week as several big reports are due to come out. Aside from Consumer Sentiment on Friday, investors will also have an eye on Existing Home Sales and New Home Sales, due out on Tuesday and Thursday respectively, as well as manufacturing survey data for October.
The Manufacturing PMI data, due out on Thursday, has the potential to cause a swing in the markets as the August and September figures showed a contraction for the first time in three years. Another decline suggests a strong downward trend rather than a slight hiccup.
Either Way, Buckle Up
This week promises to be an exciting one if nothing else. With so many factors at play, volatility is likely for the Dow and the S&P 500.
However, if strong earnings are topped with encouraging economic data, markets could head to new highs. A positive conclusion for trade talks between the U.S. and China would be the ultimate catalyst, but even rhetoric that suggests there’s been further progress is probably enough to push both the Dow and the S&P 500 to all-time highs.
As of this writing, the author was long AMZN.
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