Weekly Market Update & SPY Technical Analysis
The US presidential election is on the line, and investors are watching at the edge of their seat. Lets discuss possible scenario outcomes:
Under Donald Trump:
- Pro-Business Stance: Trump's policies typically favor lower taxes, reduced regulation, and incentives for businesses, which can boost corporate earnings and stock valuations.
- Energy and Manufacturing: Industries such as oil, gas, and traditional manufacturing might see gains due to supportive policies and deregulation.
- Trade Policies: More aggressive trade stances could create volatility, especially if tariffs or trade wars are reignited. This could reignite inflation in the U.S., something that may spook the markets.
Under Kamala Harris:
- Social and Environmental Focus: Policies under Harris might focus more on social programs and environmental regulations, potentially leading to increased government spending on green energy and healthcare sectors.
- Higher Taxes on Wealthier Individuals/Corporations: This could pressure corporate profits and the wealthiest investors, possibly affecting stock market sentiment.
- Tech and Innovation: Support for tech, education, and infrastructure could benefit related sectors, but stricter regulations on big tech could introduce some headwinds.
The two presidents have polar opposite views, but they do have one thing in common, and that’s the plan to spend a lot of money. This is assumed to further increase the U.S. debt levels, which can force The Fed to print more money, in turn inflating prices once again. Trump’s tariffs may at first cause inflation, but in the long run they will help pay down America’s debt. Furthermore, his strict stance to end the wars across seas may alleviate the U.S. from having to finance those wars.
The election won’t be the only big test next week, the market will have to face a new FOMC meeting and interest rate decision from The Fed. This is the first meeting since The Fed’s decision to implement a jumbo rate cut in September. Just a month ago, the odds of a second rate cut were near 100%, but new economic data and changes in the bond market now predict another 25 BPS cut.
SPY Technical Analysis:
SPY fell from its highs last week as new earnings from large cap tech stocks forced a sector wide pullback. It is now trading near its 565.00 pivot support, a place that challenged SPY buyers for multiple months before it broke through. A break below this level can turn markets very bearish, possibly forcing a quick decline to 540.00-550.00. Buyers need to defend the 565.00 level to reinforce their position above it and possibly headlock to all time highs.