Markets Poised to Rally From the Christmas Thrashing?

S&P 500

As of Friday, the S&P 500 and the Dow Jones industrial average are both at five-day highs. After tanking yesterday, these important trackers are back in the green.

What’s behind the change? Washington Post business writer Taylor Telford is citing analysis that comments from Fed Chairman Jerome Powell may be starting to have a palliative effect, as well as new positive progression on U.S./China trade talks, including the postponement of key tariffs that would have poured fuel on the fire.

All in all, it seems that the markets are in the grip of quite a lot of uncertainty, where news one or the other pushes stocks wildly up and down. We have the government shutdown, which is now in its fifth day. We have wild and erratic news coming out of the American White House. Tensions between, say, the president and the Fed chairman, or the president and the Justice Department, or the president and key U.S. lawmakers with committee status, can move markets. So can the Chinese trade situation, given how fundamentally connected the two economies are.

In the latest Washington Post Reports podcast yesterday, commentators talked about what it feels like to look at these volatile numbers.

“It sounds and feels like a horror film,” one podcaster remarked, using words like “surge” and “stumble” to describe recent market activity. “The stock market is going insane – I open up my 401(k) and tremble a little bit.”

For now, stocks are climbing again, but many experts are cautioning investors not to depend on a real sustained rally. It’s just not time yet, according to some of the biggest voices in the financial world. These include Alan Greenspan, who has historically been hailed as the American financial oracle. In recent interviews and comments, Greenspan is urging Americans to understand that market corrections are imminent and rallies are, at this time, pretty unlikely. That said, some see green shoots.

“December has been brutal for Wall Street,” wrote Telford yesterday. “A trade conflict with China, the Federal Reserve’s decision to hike interest rates, which drew attacks by President Trump, and a partial government shutdown have rattled investors in the worst month for the markets since the financial crisis. … The uncertainty has dampened consumer attitudes, according to the Conference Board … Concerns about an economic slowdown have pushed consumer expectations for the future to their lowest point since November 2016 … As the market has flirted with bear territory, many analysts have wondered if this is the beginning of an economic slowdown.”

Telford cites remarks by Ivan Feinseth, chief investment officer at Tigress Financial Partners, who argues that those positive signals will likely have some effect.

“We are reaching the end of the forced selling pressure and panic that have driven the market lower throughout the month of December,” Feinseth reportedly told investors Friday. “Even as a number of negative factors including the government shutdown still remain, reassuring comments from Fed Chair Powell and positive movement on U.S./China trade talks are starting to provide some support for the market.”