It appears U.S investors’ concerns with global trade wars are dominating U.S stock market direction for the last two years:
This is with valid reason, as prior research of ours (Global Economy affects U.S stock market returns) has pointed out that whilst a global recession does not necessarily result in a U.S recession, it can certainly lead to one if the U.S economy is vulnerable. Additionally that research pointed out much bigger than expected correlations between U.S stock market returns and the state of the leading data for the rest of the world.
As far as we are concerned, a global business cycle downturn has been underway since December 2017 and it is certainly being accompanied by a global-trade (imports+exports) recession as shown by one section of our Global Economic Report:
But let us get back to what keeps us awake at night. The global LEI’s are struggling to complete a rebound that commenced in late 2018, and this is occurring against the backdrop of a very vulnerable RecessionALERT US leading indicator.
Failure for a global recovery in the country LEI’s will almost certainly drag the US LEI underwater if past decades of history are anything to go by. If the U.S and China can reach some kind of compromise before the year is out, then the global LEIs are likely to pick up and the US stock market is almost certain to rally to new highs, despite stretched valuations.