Funding Bill News Can Drive Market Rebound but Obstacles Remain
We’ll remain disciplined as we continue to hunt for fresh meat for the Portfolio.
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After moving back into correction territory, with a cumulative decline of 10% over the last few weeks, and returning to oversold status as well, the market is once again looking to rebound as we close out the week.
Fueling this latest attempt is word that the Republican funding bill to avert a government shutdown on Friday night is poised to pass, removing at least one concern on Wall Street’s list.
Let’s remember though that, while a market rebound would be welcomed, other issues, including upcoming tariffs, next week’s Fed policy comments and questions over June quarter guidance could limit the market’s near-term gains. Clearly seen in the chart below, the S&P 500 will face some initial resistance at the 200-day moving average (5,738.62) and again at the almost intersecting 50-day and 100-day moving averages.
So, while the market is overdue for a bounce, we continue to think it’s going to take more than a few positive data points to propel the market dramatically higher on a sustained basis near term. A likely scenario is that it recovers from being deeply oversold but remains volatile potentially through the first half of the March quarter earnings season.
Our thinking on this stems from what lies ahead over the next four to five weeks:
- The Flash and then the final March PMI data
- Initial European Union tariffs that will escalate mid-month
- Trump reciprocal tariffs
- ADP’s March Employment Change Report
- The March Employment Report
- March CPI and PPI
- March quarter earnings and June quarter guidance
What this means for us is that we will continue to focus on companies benefitting from multiyear structural changes and spending that are happening and are poised to deliver superior earnings growth, picking our spots as we do so. We will continue to listen to the data and be mindful of the market’s valuation and technical setup, and should the situation arise, we will prudently harvest gains and raise cash when warranted.
