We didn’t even have to hold our breathe after our last blog post before the markets immediately moved to the downside, finally taking a breather after printing almost 10% higher in 40 trading sessions. The Relative Strength Index immediately moved back below levels of overbought after President Trump commented on Monday during a NATO summit that it might be better to wait until after the 2020 election to settle the full trade dispute with China. Markets did not appreciate the off cuff comment from the President resolving lower before the open; however, throughout the day price action firmed fairly well. While the pullback wasn’t too unexpected, (as we know that markets will correct themselves to the mean after periods of moving too far in one direction) conviction of whether or not we are in for a longer term pullback is still obscure. As evidenced by today’s market opening; the S & P 500 is immediately bouncing back after an unnamed insider believed to be in close conversation with the Chinese says that perhaps trade negotiations are going better than Trump commented on Monday. This statement from Reuters was followed by comments from the President himself, on his trip to the UK, that talks with China are going well.
It would not surprise us if a choppy market cycle ensues. Choppy markets are ones moderate price swings take place over multiple days without a true direction being evident. Trying to invest during a choppy market cycle is difficult; therefore, we’d exercise caution in trying to outsmart the extemporaneous verbiage making its way out of the White House or its trade advisors.