Week-In-Review: Bulls Keep Running In 2020
The market continued to rip higher last week and refused to fall even as geopolitical tensions flared up in the Middle East. The fact that the market refused to fall clearly illustrates how strong an influence the Federal Reserve has on the market. Remember, in addition to the Fed slashing rates three times last year, it is also aggressively expanding its balance sheet (code for printing money) and that continues to send stocks racing higher. Eventually, this exceptionally strong action will end but until it does, the bulls remain in clear control.
The market opened lower but closed higher on Monday after buyers showed up and, once again, bought the latest dip. Investors were focused on the fluid situation in Iraq and Iran and were looking for clues as to how that will unfold. Stocks ended mixed on Tuesday as investors were concerned with the ongoing threat of a possible US-Iran conflict. After Tuesday’s close Iran fired several missiles at a US military base in Iraq but no one was killed. On Wednesday, the market opened lower but turned higher after President Trump calmed everyone down and signaled the US would not respond with force. Experts believe that Iran purposes fired missiles at areas where they knew there would be no causalities. In other news, gold and oil both sold off as cooler heads prevailed.
Thursday & Friday Action:
Stocks edged higher on Thursday as investors looked forward to China signing the trade deal and looked to earnings season which is slated to begin next week. Thursday’s jobless claims data follows stronger-than-expected private payroll numbers released Wednesday. ADP and Moody’s Analytics said U.S. private payrolls increased by 202,000 in December, topping a Dow Jones estimate of 150,000. Before Friday’s open, the government said U.S. employers added 145,000 new jobs which missed estimates for 160,000.
Market Outlook: Easy Money Is Back
Once again, global central banks are back on the easy money bandwagon after the Fed and the ECB both announced more easy money measures directly aimed at stimulating global markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. In 2019, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks are moving in the right direction which is another positive. As always, keep your losses small and never argue with the tape.