Trade Agreement News Could Spark an Upside Breakout
The most unexpected outcome right now is that the Trump tariffs will work. But the announcement of trade deals could trigger upside follow-through.
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The market’s technical action improved on Monday due to some tariff delays and dovish comments from a Fed member, but pessimism about economic conditions is building as first-quarter earnings season starts.
Despite tariff chaos and economic uncertainty, possible trade deals with countries such as the U.K., Japan, and South Korea could hit at any time. These deals could serve as blueprints for deals with 50 more countries, but the market does not appear to be embracing the potential impact of this progress.
The tariff issue was certain to create uncertainty and turmoil, but what has made it far worse is that it is hitting at the same time that the economic cycle is turning down. Some economists say that the economy is already exhibiting recessionary tendencies, and tariffs are accelerating what would have already occurred. Economic pessimism is building and consumer expectations are falling as worries about inflation rise.
The most unexpected outcome right now is that the Trump tariffs will work. Treasury Secretary Bessent commented on Monday that the Trump economic program was a three-pronged attack of trade policies, tax reform, and regulatory relief. He is confident it will work, but obviously, it is not going to be a smooth process.
The most important issue in the short term is the potential announcement of trade deals. This could happen at any time, and it appears to be providing some underlying bids.
The major indexes tested the highs that were hit last week after one of the biggest single-day moves in history. There has been a pullback and some consolidation subsequently, and now the issue is whether the market has the juice for an upside follow-through. If it is hit with trade deal announcements, then the potential for another jump higher is quite good.
We have a quiet open developing on Tuesday morning as market participants await more news flow and the start of earnings season.
At the time of publication, Rev Shark had no positions in any securities mentioned.
