Is it happening again? After what has to this point been a perfectly good earnings season for the US stock market sending the S&P 500 to new all-time highs in the process, the President spoiled the party yesterday when he tweeted that a new round of tariffs would be instituted on Chinese Imports. Stocks had erased all of their declines from Powell’s Wednesday press conference by mid-day Thursday, but then the President’s tweet sent equity markets reeling with the Dow falling more than 1%, while the yield on the 10-year US Treasury fell back below 2%.
If this whole scenario sounds familiar to you, that’s because we saw the same thing last quarter. Remember back in April when the S&P 500 rallied to new highs in the early weeks of earnings season? There was a feeling then that the market was finally breaking out of its rut and on the path to a sustained breakout. But then over the first weekend of May, on a Sunday afternoon no less, the President sent out a series of tweets outlining his plan for increased tariffs on Chinese imports. The following Monday, the market opened lower and kept falling throughout the month. By the end of May, the S&P 500 was down 6.6% for the month, making it the worst May for the S&P 500 since 2010. August has historically been an iffy month for the stock market as many on Wall Street take vacations and try to relax, but if the market follows the earnings season script from last quarter, this will be an August of little rest. Start a two-week free trial to Bespoke Premium to receive our best equity research on a daily basis.