Mark Newton on US-China Trade Deal, Market Rally, and Tech Stocks

Market Reaction to US-China Trade Deal

• ⚡ A monster rally kicked off the week with stocks up significantly, driven by signs of de-escalation between the US and China on trade.
• 💡 This geopolitical de-escalation extends beyond US-China to include potential positive developments with India-Pakistan and Russia-Ukraine.
• ⚠️ While positive, the final outcome of tariffs remains uncertain, but the initial news is a strong positive for markets.

Market Outlook and Staying Power

• 📈 The current rally is believed to have legs for the year, despite near-term consolidation expected by mid-to-late May.
• 📉 A sell-off is anticipated in June, but it's unlikely to reach previous lows, suggesting a bullish sentiment despite a historically "hated" rally.
• 🎯 The S&P target for the year is set at 6650, with the market structurally in better shape than earlier in the month.

Technology Sector Analysis

• 👍 Mark Newton maintains an overweight position in technology stocks, having bought in early April.
• ⚠️ Traders heavily weighted in tech may consider taking some profits due to the sector being a crowded trade and nearing overbought conditions.
• ⚖️ Potential issues for tech include increased scrutiny from the administration and antitrust concerns, though the sector remains technically attractive.

Treasury Yields and Dollar Trends

• 📉 Haven trades, including Treasuries and the dollar, are being unwound as equities rally, pushing yields higher in the short term.
• 💰 Newton is a proponent of owning Treasuries at current yields, anticipating a turn lower in yields over the next few months, despite short-term upward pressure.
• 📉 The dollar is expected to weaken further over the next three to six months, with the US likely to outperform other global markets.

Key Market Indicators and Sentiment

• ⚠️ Treasury yields are a critical market to watch, with a move above 4.8% on the 10-year yield being a significant concern.
• 📊 While there has been volatility, the fixed income markets have been relatively calm, with junk yields not widening dramatically, indicating underlying stability until early April's dislocation.
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