S&P 500 ANALYSIS, CHINA TARIFFS, US CPI DATA, FED POLICY, INFLATION – SCHOOLS.
- The S&P 500 is likely to rise if President Joe Biden returns some of the prices in China
- The equity market could be eliminated if the US CPI data exceeds the forecasts
- The SPX outlook is bearish because the technologies are not showing any sign of a major reversal
The S&P 500 index could get a whiplash this week, amid a recent report on the Biden economy pulling prices on over $ 10 billion worth of Chinese assets and U.S. data. CPI. While the VIX is nearing a one -month low, the trend since April indicates volatility could continue to rise in the coming days and weeks. What will trigger the next spike?
THE BIDEN TAKES THE CHINA TARIFF
In 2018, President Donald Trump imposed over $ 300 billion in tariffs on Chinese assets, referring to Section 301 of the Trade Act of 1974. The following legislation:
“provided to the Office of the United States Trade Representative (USTR) more rights and powers to investigate and take actions to fulfill U.S. obligations under trade agreements and to respond to certain foreign trade practices ”.
However, with the current rise to ten -year highs, U.S. President Joe Biden is considering returning some of these trade taxes to reduce the pain of inflation in the United States. hale. The administration views them “one at a time”, due to the complexity of the issues and (most importantly) the geopolitical consequences of their demise.
For more on geopolitical issues, follow me on Twitter @ZabelinDimitri.
Competing with China and reversing Beijing’s attempts to increase its share of power are important other policies for President Biden. The recent $ 600 billion global investment framework, the Indo-Pacific Economic Framework, and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade agreement show significant, among other initiatives.
Therefore, Washington may want to be more careful in its use of its resources, namely wages. In the current macroeconomic climate of sharp growth and tight credit conditions, the financial damage from such a policy has increased.
Read more: How to trade the impact of politics on global financial markets
In the tour, there will be a competition between Treasury Secretary Janet Yellen and USTR Katherine Tsai. The former is seen as tariff reductions, and the latter is more important to the customs government as a “critical piece of leverage” that Washington can use to take permits from China.
From the household side, prices can be an interesting policy to use if they reduce inflationary pressures on key household items (such as electricity) rather than the midterm election. . There are labor unions for consideration, who are interested in keeping pay. Opposition to that gradient could threaten the return of politics by a large constituency of Mr. Biden.
From this perspective, the decision to return Chinese prices is a dichotomy of competing domestic and foreign policymakers.
If wage reductions are announced, the S&P 500 could see the most significant cuts. Investors may interpret this policy measure as a strike to reduce inflationary pressures, and in turn, the reason the Fed is pushing hard to raise interest rates. But what if this week’s CPI data is covered?
US CPI DATA: WHAT TO EXPECT
Economists expect the growth to be 8.8% year -on -year for June, better than the May peak of 8.6%. The price increase will begin around May 2020, with a rest period between September and December of that year. Since then, however, inflation has risen.
US CPI (% y/y, 1950-present)
Source: TradingEconomics
This is seen as a function of two price factors – such as the termination of the post -Covid supply chain – and demand -pull dynamics. This is where demand grows faster than supply. More and more investors are looking for smaller assets to increase their value. Since the onset of the disease, governments and central banks have poured trillions of dollars into the industry to support demand, but efforts have been difficult to give consumers an easier time. .
Increasingly now looking away from the “transitory”, Fed officials have raised prices as much as 75 per cent in the period (as they did in June for the first time in about a third of a century). The stock is expected to be sold at a 75 -point increase for July. What future CPI data might help determine if those bets are stable or whether they will rise again in price.
If the CPI data exceeds the forecast of 8.8%, the S&P 500 could experience a significant decline at the same time that the inflation rate rises to reflect expectations for a 75 bps rise. While the VIX is trading at its lowest point since June 9, it is subject to significant volatility, setting the benchmark equity index for a sore spot.
VIX – Daily Chart
The Vix chart is created using TradingView
S&P 500 REVIEWS
The S&P 500 jumped back from a low of 3642.31, to just under six percent. The next level that needs to be cleared is 3981.88, where the equity index shortened its rise in May and its decline in June when it was low for several days.
S&P 500 – Daily Chart
The S&P 500 chart is created using TradingView
Looking ahead, if the index fails to clear 3981.88, it could throw a bearish barrier and lower confidence in the S&P 500’s short-term trajectory. That confirmation can be seen as the buyer’s failure to double their bearish perception. The tested support at 3642.31 can be tried again on the cards.