Stocks continue to grind higher. Major indexes opened higher today, with the S&P 500 Index already posting gains in three of the four days so far this week. The volatility that has marked the last three months has been nowhere to be found so far in 2019, with the index consolidating gains in a less than 4% range over the last two weeks. We continue to believe that the index may struggle to climb above resistance at these levels in the very short-term, but ultimately expect the bottoming process to play out and for stocks to push back towards all-time highs by the end of the year. On the upside, above 2650 the S&P 500 will have to battle its 200-day moving average (currently at 2741), while on the downside a retest of the Christmas Eve lows near 2350 remains a possibility.
Trade optimism increases. Stocks rallied yesterday after reports that Treasury Secretary Steve Mnuchin proposed lowering tariffs as an incentive for the Chinese to make a deal when Beijing’s top negotiator comes to Washington at the end of the month for another round of formal talks; however, gains were subsequently pared heading into the close as administration officials downplayed the situation. Still, both sides have publically expressed optimism on the need to find common ground with China’s economy starting to feel the effects of tariffs on exports to the U.S., while the market’s fourth quarter slide has garnered the attention of President Trump. Whether or not the U.S. decides to extend the olive branch, we still view the recent developments as a clear sign that both parties are working in earnest to find a means of easing tensions.