S&P 500 Posts Best First Half Since 1997, Optimism Continues

The S&P 500 posted its best first half in 22 years last week on Friday, due in large part to reassurances from the U.S. Federal Reserve in June. Investors’ optimism was strengthened even more over the weekend, with fears of an escalation in the U.S.-China trade fight abating with a successful G-20 conference held in Japan.

Best First-Half Performance in Over 20 Years

On Friday, the S&P 500 closed at 2941.76, up 16.84 points, or 0.6% on the day and 3.8% for the second quarter. The Dow Jones Industrial Average rose 73.38 points, or 0.3%, to 26599.96 and is now up 14% in 2019.

Friday’s optimism stemmed from Federal Reserve Chairman Jerome Powell addressing fears of how a continued trade fight between the U.S. and China could hurt the U.S. and global economy. Powell said the Federal Reserve was watching the political tensions closely, and would take action, such as cutting rates, if the economic forecasts deteriorated. Investors welcomed this news, and set the stock market on a climb throughout the month of June to a benchmark first-half performance close.

U.S.-China Trade Tensions Factor

Many investors questioned whether the market run would continue, and all eyes were on the U.S. and China over the weekend. After a successful G-20 summit in Japan, President Donald Trump and Chinese president Xi Jinping agreed to resume trade negotiations. Investors’ optimism on Friday was rewarded as Donald Trump promised there would be no additional tariffs on Chinese imports, and China also agreed to stop any tariffs on the U.S., as well as agreed to purchase more U.S. agricultural products.

The U.S.-China trade dispute has contributed to volatility throughout the global economy in recent months, as international imports and exports have decreased. Since the dispute began, President Trump has imposed import tariffs on $200 billion worth of chinese goods, and China has retaliated with higher taxes on $60 billion of U.S. imports.

Stock markets around the world rose sharply at the news of successful trade negotiations between the two countries, and Wall Street shares hit intraday highs on Monday. The Dow Jones Industrial Average leaped almost 200 points in afternoon trading in New York—an intraday record—before closing up 117 points at 26,717. The wider S&P 500 index closed at a record high of 2964. In London, the FTSE 100 closed 76 points higher at 7,502.

Bottom Line

Investors remain optimistic and the global market gains reflect this renewed confidence in the market. For now, President Donald Trump seems to be in favour of good trade relations between the U.S. and China. Some industry experts have speculated that the U.S. president would likely prolong the trade truce in favour of U.S. growth ahead of next year’s presidential election, as part of the president’s bid for re-election strategy. The market’s optimism, for now, continues.

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Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.