Chart of the S&P 500 (SPX) and Shanghai Composite (SSEC) – Source: TheTechnicals.com and TradingView

The past week in the markets saw all three major large-cap U.S. indexes (Dow, S&P 500, and Nasdaq Composite) rise consecutively for all eight weeks since the beginning of the year. It’s actually nine weeks if you include the last week of December. For the indexes to be positive for the first eight weeks of any year is an extremely rare occurrence.

Even the small-cap Russell 2000 index achieved the same feat. As did the Shanghai Composite (the major Chinese index comprising all stocks traded on the Shanghai Stock Exchange). One of the key forces driving up these markets has been increasing optimism over the prospects of U.S.-China trade negotiations between Chinese President Xi Jinping and U.S. President Donald Trump.

Trump-Xi Meeting Planned for Late March

It was reported on Friday and confirmed by Trump that the two Presidents have planned to meet at Trump’s Mar-a-Lago club in Florida in late March. This has given investors yet another boost of confidence that both sides should be willing and flexible enough to do what it takes to get a mutually beneficial deal completed. Even if it takes longer than initially anticipated. The 90-day trade-war ceasefire between the two countries, which is supposed to end on March 1, will apparently need to be extended.

The trade talks between the U.S. and China are of utmost importance for the worldwide economy and the financial markets. This is not only due to the pivotal nature of bilateral relations between the two remaining superpowers. It’s also because any U.S.-China trade agreement has far-ranging implications for global economic growth.

U.S.-China Trade Talks Boost U.S./China Markets

The chart above features a comparison of the one-year performance of U.S. and China equity markets. Clearly, both the S&P 500 (SPX) and Shanghai Composite (SSEC) have risen sharply since the beginning of the year. Part of this dual boost has been due to optimism that both countries will likely move towards a successful trade agreement.

Clearly, the S&P 500 has performed substantially better than the Shanghai Composite in the recent past. While the S&P 500’s one-year performance is in the very low, but positive, single digits, the Shanghai Composite’s one-year performance lags far behind at negative double digits. But if a solid trade deal is indeed reached within the next month or so, we could be seeing the Chinese equity markets play catch up.

The Week Ahead

The week ahead will be jam-packed with potential market movers. As noted above, further developments in U.S.-China trade negotiations are likely. But since both sides know very well that this is such an important factor in the global economy, any developments are likely to be bullish for the markets.

Economic Data and Fed’s Powell Testimony

On the economic data front, we’ve seen some evidence of deteriorating economic conditions both in the U.S. and globally. The Federal Reserve has lately been showing some serious concerns about the economy. And this has begun to spook investors a bit. In the week ahead, several key economic releases will be featured. For scheduled economic data, there will be:

• Tuesday, 10:00 AM ET – U.S. Conference Board Consumer Confidence Survey
• Thursday, 8:30 AM ET – U.S. Advance Gross Domestic Product (q/q)
• Friday, 8:30 AM ET – U.S. Core PCE Price Index (m/m)
• Friday, 8:30 AM ET – U.S. Personal Spending (m/m)
• Friday, 10:00 AM ET – U.S. ISM Manufacturing PMI

And very importantly, Federal Reserve Chair Jerome Powell will be testifying before both the Senate and House regarding the Semiannual Monetary Policy Report on Tuesday and Wednesday, respectively. These could be significant market movers, especially if Powell continues to show worry over global and domestic economic growth.

Earnings Winding Down

Finally, earnings season is certainly winding down, but there are still several major companies slated to report in the week ahead. These include:

• HD – Home Depot (Tuesday, Before Market Open)
• AZO – Autozone (Tuesday, Before Market Open)
• PANW – Palo Alto Networks (Tuesday, After Market Close)
• BBY – Best Buy Co (Wednesday, Before Market Open)
• LOW – Lowe’s Companies (Wednesday, Before Market Open)
• TJX – TJX Companies (Wednesday, Before Market Open)
• CPB – Campbell Soup (Wednesday, Before Market Open)
• MNST – Monster Beverage (Wednesday, After Market Close)
• SQ – Square (Wednesday, After Market Close)
• HPQ – HP (Wednesday, After Market Close)
• KDP – Keurig Dr Pepper (Thursday, Before Market Open)
• PCG – PG&E (Thursday, Before Market Open)
• PGR – Progressive (Thursday, Before Market Open)
• IEP – Icahn Enterprises (Thursday, Before Market Open)
• DELL – Dell Technologies (Thursday, After Market Close)
• MAR – Marriott International Thursday, (After Market Close)