Monday’s trading closed at historic highs, added 0.55% at the end of the day. The simultaneous proximity of the new and the conclusion of the trade deal between the U.S. and China are called key drivers of market growth. President Trump, in a tweet, failed to get around the event, crediting him with taking credit.
In theory, the resolution of trade disputes and the easing of monetary policy should help equally all shares, as “the tide lifts all boats into the sea.” it is often seen as a broad market index, as it includes shares of the 500 largest U.S. companies. However, a more detailed analysis allows us to note that only five heavyweights (Apple (Nasda:), Microsoft (NASDA’:), Visa (NYSE:), Mastercard (NYSE:) and Oracle (NYSE:)) is most responsible for this 30% rally from the lows of the end of last year.
The index, which includes shares of small-cap companies, is now 10% below the peak levels reached in September 2018, when market participants dropped hopes of a speedy agreement between China and the United States. This index runs near local peak levels. However, since May of this year there is a trend of lower highs, and local lows are getting lower. This market dynamic notes that the average business is towing in the current economic conditions, and only the largest IT-corporations are able to use the current, almost monopolistic positions in their industries for revenue and profit growth.
However, being overweight blue chips in indices makes them vulnerable to correction if the news becomes less optimistic. Yet equity markets are heavily dependent on macroeconomic indicators, which will be published in excess this week.
So, today on the agenda – data on and estimates. In both cases, growth is expected after the failure in previous months.
The recovery of these indices should confirm that the Fed’s policy is bearing fruit. However, do not run ahead of the locomotive, gaining speed. On Wednesday, a few hours before the Fed’s decision on the rate, the first estimate for the third quarter and . Friday’s growth is expected to be 90,000, which is almost twice as bad as the average growth rate during the last economic expansion.
Simply put, markets, in the form of indices and, may well stumble in the coming days, if the very bold expectations of bidders are not confirmed in the form of strong macroeconomic data.
FxPro Analyst Team