The Market Is Starting to Follow a Trade Deal Pattern
Optimism about the potential for new trade deals, followed by the reality that they are far off, continue to drive the market.
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The market enjoyed a euphoric open on Wednesday as optimism grew about positive progress on trade and tariffs. However, the action fizzled as the day progressed, and it became clear that it may take some time before any trade or tariff deal is announced. Treasury Secretary Bessent said it would likely take years to complete a full trade agreement with China, and countries like Vietnam are just starting negotiations with the U.S.
This pattern has occurred several times recently. There is a positive reaction to comments about progress on trade, but then there are comments about obstacles, and nothing specific is ever finalized. Investors become excited about the possibility of putting this uncertainty behind us but then are disappointed when the situation remains muddled and confused.
The good news is that the indices did hold on to some gains, although they closed near the lows of the day. Breadth was still very good at around three-to-one positive, but nothing finished very strong, and the mood was not nearly as upbeat as it was at the start of the day.
One positive shift is that there appears to be more interest in stock picking. Many names have been hurt lately as they have been dragged lower by the indices but still have good prospects. There appears to be a little more interest in finding these values now that there are some signs of technical support.
Overall, the indices are in better shape now, and they can afford a deeper pullback as they regroup to attack formidable overhead resistance. However, what the market really needs is some solid news flow. The constant hope and disappointment about tariffs and trade are not going to give the market the fuel it needs to overcome technical obstacles.
I plan to spend more time looking for good values to add to my shopping list. Earnings reports in the next several weeks should provide some good ideas as it becomes clear what companies are doing the best at navigating this difficult economy.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
