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The market continued to rip higher last week as earnings season officially began. Most of the big banks reported strong earnings last week and cited strong profits from “trading” as a main contributor to the results. The market surged last quarter and most big banks do very well in that environment so it should not be a “big” surprise that most banks reported strong earnings. Taking that a step further, I would be surprised to see earnings disappoint for most other industries as well. Q4 was strong and most stocks, especially in this environment, will likely rally after reporting earnings over the next few weeks. For now, the market is exceptionally strong -and extended- so be ready for the pullback, when it occurs. Until then, do not fight this very strong tape!

Monday-Wednesday’s Action:

Stocks rallied on Monday after the US removed China as a currency manipulator and investors looked forward to Wednesday’s signing of the Phase 1 of the trade deal. For now, cooler heads prevailed in the Middle East and the market is happy about that outcome. Earnings season kicked into higher gear on Tuesday after several big banks reported earnings. Notably, JP Morgan and Citigroup beat estimates and reported strong quarters but Wells Fargo fell after reporting earnings. On Wednesday, President Trump signed Phase 1 of the trade deal with China. In other related news, Larry Kudlow, Director of the National Economic Council under President Donald Trump since 2018, said he expects Tax Cuts 2.0 to be announced during the campaign. If that passes that will give the economy another strong boost.

Thursday & Friday Action:

Stocks rallied sharply on Thursday, helping the S&P 500 top 3,300 for the first time ever. The market cap for Alphabet topped $1 trillion and the tech giant joined Amazon, Apple, and Microsoft in the four comma club. Before the open, Morgan Stanley reported a very strong quarter. On Friday, stocks rallied nicely after investors digested the latest round of mostly positive economic data.

Market Outlook: Easy Money Is Back

Once again, global central banks are back on the easy money bandwagon after the Fed and the ECB both announced more easy money measures directly aimed at stimulating global markets. The market has soared all year based on two key points: optimism that a trade deal will be reached between the U.S. and China and more easy money from global central banks. In 2019, the Federal Reserve reversed its stance and moved back into the easy money camp. Then, other central banks followed suit and that means easy money is back to being front and center for the market. Separately, the trade talks are moving in the right direction which is another positive. As always, keep your losses small and never argue with the tape.