News from Asia Whiplashes the Market... Unnecessarily

Excerpt from Louis Navellier's Marketmail - 5/20/2018

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The stock market got off to a strong start last week after China and the U.S. agreed not to impose tariffs on each other. Specifically, China's Vice-Premier Liu He said the two sides "reached a consensus, will not fight a trade war, and will stop increasing tariffs on each other." A joint statement issued in China and Washington said China would "significantly" increase its purchases of American goods, so in the end, the financial media overreacted to trade war talk, since these tariffs were used merely as negotiating tactics.

 Later on, the stock market sold off on Thursday due to news that the North Korean nuclear summit in Singapore in June had been cancelled (temporarily, as it turns out). The stock market usually rallies going into holiday weekends and last week was no exception, with the S&P rising 0.3% and Nasdaq up 1.1%. People are usually happy leading up to holiday weekends and that tends to rub off on investor sentiment.

We have a lot to be thankful for, such as the fact that the 10-year Treasury bond yield has fallen under 3% and the Fed's FOMC minutes revealed that any inflation fears are just "temporary." Furthermore, the fact that small-capitalization stocks in the Russell 2000 continue to exhibit tremendous relative strength is a good sign, since the breadth and power of the overall stock market is expanding. Traditionally, when the Russell 2000 leads, it is very bullish for the market, so June and July are shaping up to be very positive!


In This Issue of Marketmail

Bryan Perry will analyze an interesting new word from last week's Fed minutes, and what it implies for summer market performance. After his usual jaunt down memory lane, Gary Alexander looks at corporate liquidity for clues to the market's next big move. Ivan Martchev sees danger in the emerging markets and a delayed reaction to the dollar strength in the commodity markets. Jason Bodner advises us to watch the institutional traders more than the silly stories about news events which supposedly "move the market." In the end, I'll bring you a few more reasons to expect continued strong market performance in June.