Chips Rejoice!

While not a new deal the truce announced last weekend between the U.S. and China has put a little zip in the market this morning as stocks and sectors that suffered the most with the current and proposed trade tariffs are experiencing a positive reaction to the Trump/Xi announcements. The new restart of negotiations with China and the relaxing of the conditions with Chinese technology giant Huawei has given semiconductors that do business with Huawei and other Chinese telecommunications components manufacturers’ new relief and possible return to profitable Chinese business. The details are a little fuzzy, as you can imagine, but most of the semiconductor stocks are going to be up big time today and continue a move that began two weeks ago.

We finished June on a positive note and look to quickly move through a short holiday week with this zip in our step. Look for Apple, Federal Express, and many more industrial and even consumer discretionary companies that will likely be bid up until we get into second quarter reports which will begin in ten days or so. Less about the quarter just finished but all attention will be on forecasts and guidance from our best technology and industrial companies to get a glimpse of their future for the second half of 2019. I would still expect a little caution from management as a lot of details and movement toward a true trade truce is still largely uncertain at this stage.

Maybe I am being simplistic but I really believe Trump will continue to beat his optimistic American first drum through 2019 and much of 2020 as both major parties look toward the next election cycle. And, importantly as we have talked about for the last few months, the Federal Reserve is now officially a backstop to the U.S. economic condition and will likely reduce short term interest rates later this month of July. So, I continue to say invest and trade the market in front of us and at this moment the enthusiastic reaction from the weekend meetings may have the capability to get us through the historically seasonal summer months with a neutral at worst and perhaps a positive lift as investors focus on the fourth quarter stimulation from any trade news.

I hope everybody has a safe and fun Fourth of July holiday and the stock market provides a few surprises like a fantastic rocket launched sky blast that make us go AHHHHH.

Make it a good one,

Roger N. Steed

July 1, 2019

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