Stock market update:
A busy week awaits investors with the release of corporate earnings, a Fed meeting and a high-stakes visit by President Trump to Asia for some more trade diplomacy. The upcoming quarterly results for Microsoft (MSFT) and Apple (AAPL) may prove to be key, but investors are also highly attuned to the continuing US-China trade negotiations.
As interest rates have fallen, many companies are able to lower their own borrowing costs and generate stronger earnings growth, creating a sustained tailwind for stocks. This is especially true for smaller-cap stocks and emerging markets, whose gains helped to push year-to-date performance into positive territory. Gold and inflation hedges like TIPS are also performing well, benefitting from a weaker dollar.
Despite the upbeat tone of recent trading, there are still plenty of concerns that could send markets into a swoon. The biggest issue is the uncertainty surrounding whether or not the ongoing trade war between the US and China will ultimately have a negative impact on global growth, and how that would translate into higher interest rates. In addition, valuations remain elevated and any disappointments from the tech sector could push stocks lower. On the bright side, hopes are rising for a Middle East peace deal and the Trump administration is taking steps toward more rational conversations with Xi Jinping.