Global equities came under significant pressure last week as a result of fears about an escalating trade war. The S&P 500 had its worst week in several years and wiped out all of its gains for the year. Concerns about the data privacy issues that Facebook has been facing also pressured tech stocks. The combination of these factors has markets on edge.
It is always hard to predict market moves in the short term, but given strong earnings and a robust economy, fundamentals still look positive for stocks despite valuations and event risk remaining elevated.
U.S. Treasuries have to deal with nearly $300 billion in auctions this week. I remain concerned that rising deficits have the potential to push yields higher, especially if foreign buyers don’t support the increased size of the auctions.
I expect volatility to continue to remain elevated in the short term, but looking at fundamentals, stocks remain positive and bonds remain negative. I don’t see this changing in the short term.
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