The Nasdaq 100 has enjoyed a commendable run higher this week despite resurgent coronavirus fears after uncertainty has spread regarding the transparency of China’s reporting on the virus. On Thursday, White House Economic Adviser Larry Kudlow revealed the Trump administration was “quite disappointed” that China has not accepted invitation for a CDC team to help with the outbreak. The comments align with earlier remarks from Fox News sources which stated administration officials believe China is under-reporting coronavirus cases by at least 100,000.

Similarly, S&P ratings agency warned on Thursday that “China could see negative sovereign rating action if there is a fiscal spending splurge to compensate for coronavirus hit to the economy.” While the exact severity of the outbreak is unknown, it appears as though US officials and economists alike still harbor concerns over the virus’s spread. Evidently, the concerns are not enough to deter the Nasdaq despite warnings in Alibaba’s earnings call Thursday morning.

Nasdaq 100 PRICE CHART: 4 - HOUR TIME FRAME (DECEMBER 2019 – FEBRUARY 2020)

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It begs the question then, what will it take to stop or even stall the current stock rally? At present, it seems the trend higher is largely unbothered by these shorter-term themes as it continues to watch the Fed’s gradual balance sheet expansion and repo operations – but dangers loom.

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At the beginning of the year, I highlighted rising inflation as one of the largest – but currently dormant - threats to further equity gains. With that in mind the recent uptick in headline CPI figures, highlighted by James Stanley, could make it more difficult for the Fed to justify further rate cuts which would effectively remove a key fundamental tailwind behind stocks. Consequently, rising inflation may be the largest threat to a longer-term continuation in the equity rally.

In the meantime, upcoming earnings from Nvidia could deliver a morsel of influence on the tech-heavy Nasdaq and the semiconductor sector. While tech earnings and similar themes may spark volatility over the shorter term, it seems unlikely these smaller, fleeting concerns can stall the freight train that is the US equity market in the lens of the broader picture. Further still, IG Client Sentiment Data reveals retail traders are overwhelmingly short US equities which also suggests continued strength.