The headlines Tuesday are bragging about EU tariff delay being the reason for the hefty rally. Yet indeed it was news of those potentially large tariffs last week that led to a nasty round of profit taking.

The key question is…what happens next?

The answer will determine whether indeed the bull market is back in charge…or if more pain is on the way like March and April. So that will be our focus for today’s Reitmeister Total Return commentary.

Market Outlook

As suspected 6,000 is a strong area of resistance for the S&P 500 (SPY - Get Rating). Nothing alarming in that given that we were recently as low as 4,835. Yet it is a statement that investors do not want to press higher until they have more certainty on tariffs.

On that front we were served good news on Tuesday that we will delay the ample tariff that were expected to be levied on the EU. Yet delaying tariff increases is different than resolving trade disputes amicably with little harm to inflation or the economy.

The good news is that more often than not we find these delays provide fertile ground for negotiation and positive resolution. The bad news is that it “ain’t over til its over”. So, lots of opportunity for more tough talk in the negotiations that can send stocks south once again.

My gut continues to tell me that this is 2018/2019 revisited on the trade front. That being where outrageous early demands give way to reasonable outcomes. What is often called the “sausage making process” that is hard to watch at times.

Clearly most investors are on this bandwagon given how we are well above the recent bottom and just 4% away from the all time highs. But just because there is a bullish bias doesn’t mean that we can’t have more volatility or another stiff correction on the horizon. So good to remain cautiously optimistic in our approach.

For those concerned that recent tariff turbulence may push us towards recession, you will be glad to know that is not showing up in the data. The GDPNow model has the US economy at +2.2% for the second quarter. Yet we only have 1/3^rd of the necessary data in hand.

Interesting to note that the Blue Chip Economist Panel has a consensus estimate of only +1.2% for the quarter. Typically these 2 models get closer to each other by the end of the quarter. Hopefully the pull is higher towards the current GDPNow reading.

Lastly, as for the Fed they have been very clear that no rate cut is forthcoming at the June or July meeting as they want to have a “wait and see” approach with tariff talks. Yet the odds still point to 2 cuts by the end of the year.

At this stage its not really about the present stance of the Fed…or inflation…or the economy. Tariffs are really the primary focus. We just need to see more of these delays lead to positive resolution.

If yes, then stocks will break above 6,000 and make new highs by the end of the year.

If not, then at best we get stuck in a trading range below 6,000. And at worst revisit recent lows or lower if recession probabilities increase. The odds of that are diminishing of late. But until the tariff talks are truly over, then anything is possible.

What To Do Next?

Discover my portfolio of top picks perfectly suited for today’s unique market environment.

It combines my 45 years of investing experience along with the proven benefits of the POWR Ratings quant model.

This path has led me to selecting 10 timely stocks and 3 ETFs that will place you on the right side of market action.

If you are curious to learn more, and want to see the tickers for all 13 of these recommendations, then please click the link below to get started now.

Steve Reitmeister’s Trading Plan & Top 13 Recommendations >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
Editor, Reitmeister Total Return

SPY shares were trading at $590.40 per share on Tuesday afternoon, up $11.29 (+1.95%). Year-to-date, SPY has gained 1.04%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...

More Resources for the Stocks in this Article