Tariffs May Not Slow Profit Momentum

BIG IMPACT OR SMALL IMPACT?

U.S. Treasury Secretary Steven Mnuchin indicated Sunday the U.S. is hopeful to strike a deal with China, which means the tariffs would never go into effect.  However, if a deal cannot be reached, how significant are the tariffs relative to the big picture?  From CNBC

Jeremy Zirin, head of investment strategy at UBS Wealth Management Research, told CNBC that President Trump's announcement Thursday on tariffs on up to $60 billion in Chinese imports didn't seem that bad.

"The economic impact of [the tariffs] is less than one-tenth of 1 percent," Zirin told "Squawk Box."

"It's actually pretty bullish what we heard yesterday," he added. "If you look at the steel and aluminum tariffs as a template, things got watered down and then scaled back. So, if you look at the whole economic backdrop, still a very good profit momentum."

TWENTY-YEAR BREAKOUT

From a bigger picture perspective, the economy does not appear to be on the brink of a recession and the 20-year breakout in the Value Line Geometric Index is still in play.  

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AN OBJECTIVE LOOK AT THE MARKET AFTER FRIDAY'S SELL-OFF

Last week was ugly in the stock market.  If we put normal human emotions aside and examine the facts, what can we learn about the odds of a new bear market relative to the odds of a resumption of the current bull market?  

BULLISH TREND, FOLLOWED BY CONSOLIDATION

The stock market was unequivocally in a long-term bullish trend prior to the recent correction.  As noted on March 21, the S&P 500 has drifted within a wide range since February 2, including last Friday's volatile session.  As long as a sustained break of the lower end of the range does not occur (something that is entirely possible), the base case remains a normal correction within the context of an existing bull market.  If a series of lower lows, below the lower end of the range, is in the cards,  we must become open to more bearish outcomes.