An eventful five trading days for Wall Street saw the S&P 500 post back to back weekly gains. The Federal Reserve helped with a much more dovish than expected stance at its latest monetary policy decision on Wednesday. Aside from the central bank, this week also saw one of the busiest stretches of the first quarter earnings season, with Amazon and Apple being the two most notable names that reported their results. Both tech giants delivered, and Apple in particular shook markets with the unveiling of a record $110B buyback. For the week, the S&P 500 added 0.6%, the Dow rose 1.1%, and the Nasdaq Composite climbed 1.4%.
Wall Street traders who tried to front run the Federal Reserve made money while the bears took it in the teeth as the S&P 500 and Treasuries notched a weekly gain, thanks largely to softer US employment data. With the market reacting to every bit of data, it is becoming increasingly hard to predict the overall direction of the market.
Future Wealth’s View
This much we know – Fed Chair Jay Powell telegraphed that the Fed’s next move will be down and not up. That’s despite inflation remaining sticky around the 3% level and persistent price pressures in the first quarter of the year. Earnings reports have been solid and most companies have delivered to expectations. Consumer confidence and spending remains strong although high credit card debt levels are a concern. This backdrop leads us to believe that, barring an unforeseen event, the stock market should continue to move up but, with the expected volatility.
One unforeseen event that may not be so unexpected when it occurs is the prospect of China with support from Russia taking clear steps to invade Taiwan. While investors are focussed on the Fed, earnings and 2024 Presidential elections, China has silently been providing military support to Russia, ignoring Biden’s warnings and crossing Biden’s red line from two years ago. We all know what happened when Syria crossed Obama’s red line in 2013 and there was no military action from the US – Russia soon invaded Crimea, beginning a decade long Ukraine war. Make no mistake, an invasion or any sign that an invasion of Taiwan is imminent will make the pandemic drop in the stock market look like a walk in the park.
Sometimes, things happen and then, we wonder why we did not have the foresight.