Stocks are ripping higher after news of a U.S.-China trade deal, but will it last? In this Wealthion Flash Market Report, Fundstrat’s Mark Newton joins Maggie Lake to react to the surprise announcement and explains why he believes this rally still has legs. Mark shares his outlook for tech stocks, treasury yields, and the dollar, and why June could bring a key market pullback even as the S&P targets 6,650 in 2025.
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Maggie Lake 0:00
Music. Hello and welcome to wealthion. I’m Maggie Lake, and joining me for this flash market update is Mark Newton, CMT, head of technical strategy at Fun strat. Hi Mark. Thanks for being with us. Hi Maggie, thanks for having me. So we have a lot of markets on the move on what appears to be a breakthrough between China and the US on trade, with both sides agreeing to suspend tariffs as they try to talk and hammer out a more comprehensive deal. I’d love to just get your initial reaction to what’s happening. Let’s start with stocks and what appears to be a monster rally we’re going to see to kick off the week.
Mark Newton 0:38
Yeah. Certainly a huge rally today, up at one point about 3% on what appears to be signs of de escalation from US and China, but also signs of, I think, geopolitical de escalation, not only with US and China, but also potentially with regards to India and Pakistan and certainly Ukraine, Russia as well. So I think markets have been, you know, greeting that with a lot of strength. I think that is a positive. Of course, there’s more to go. We don’t necessarily still have, you know the final answer as to where any of these tariffs are going to end up, but, but certainly, you know, very good news, at least for for a Monday morning, yeah.
Maggie Lake 1:19
How do you judge the staying power of a move like this? Because we know we’re in a really headline driven market, you know? What would you look for to say, okay, maybe something’s different happening. Now, I’m going to go, kind of go back and and look at my charts, and maybe maybe change my opinion. What would give you the indication that this has legs?
Mark Newton 1:39
Well, I do think it does have legs for the year. I think in the near term, we are getting close to levels where we’re likely to see at least some consolidation, and that gels with my own technicals. When I look at price and time, sentiment remains largely still pretty negative. And I think that gradually people are starting to accept the idea that, you know, these tariffs will likely be negotiated, so I think that’s a positive, but it’s really one of the most hated rallies of all time. A lot of people have been off sides and certainly have not participated. So you know, when I look at things like sentiment, that’s certainly a reason I still want to be on board. But the markets moved about 20% literally, in the last 25 days, it’s been almost 1% a day, which has been refreshing to those that are you know, might have been caught a little too long, particularly in large cap technology. You know, I majority of my tools say that markets should see some type of a peak by mid to late May and then sell off in June. But I don’t sense that we’re going to get back to the lows. So I wrote about this in April, that there were some signs in place that suggested markets could bottom and push higher because of volume, dislocation, breath being washed out sentiment, but also some of the cycles I look at that suggested that we were in place to rally at a time when, really nobody expected it. So, you know, I am not in the bear market camp. I don’t think we’re going to have a recession this year. My target for the year is 6650, for the S and P I do think that will be achieved, but it’s not going to be a straight line, particularly after a move literally straight higher on just initial evidence of negotiation and talks and so, you know, these things will take time, but for the time being, I’m very encouraged to have seen the degree of move off the lows that has helped a lot of the momentum indicators and Things I look at turn a lot more positive. So structurally, the market’s in better shape now than what it was earlier in the month. And so there are some things to celebrate, but this is going to be a tricky path, most likely over the next month, it won’t be likely. Straight up, it’s
Maggie Lake 3:58
interesting. You say it’s the most hated rally, you’re right. Because if you think about the fact we’ve come 20% it hasn’t felt great, right? It’s sort of, it doesn’t. You have to take a step back and look at the chart to say you’re right. I feel like it’s very that can really be applied to technology, right? It’s you either love to love it or you hate you love to hate it. It’s like, you know the most over on the mag seven. I mean, you know, all over, you know, Twitter and commentary. Do you see hate piled on this sector? They’re some of the biggest leaders we’re seeing today. Does that feel like it’s continued? Would you be a buyer here? How are you thinking about the tech sector?
Mark Newton 4:34
I like technology a lot. It is one of my overweights for this year. I remain long technology, and did buy technology in early April. And I think that we’re getting to a time when most that are maybe too heavily weighted in technology, might want to consider taking some off the table. If you’re a trader, you know, it has been the most crowded trade, I think, for. For some time, we’ve seen that over across many different reports saying that investors are certainly all in on tech. And, you know, for good reason. Look, I think these are companies that have changed all our lives for the better, and I think that’s a good sign. But you know, the degree to which many of these companies are now being sought after for anti trust and sort of being pushed by the administration, I sense that that could be, you know, an eventual issue. Technically, I still like the sector. Many of them are starting to get so called overbought, and so, you know, based on my prior comments, I think that it’s going to take time. I think that seeing a 15 to 20% move off the lows in many of these tech stocks, you know, is something we want to greet with warmly on an intermediate term basis, but but short term, you know, my upside for S P is, is likely right around 5900 and so we only have probably 100 points before we show some consolidation, but that would be viable, in my view, into any sort of pullback in June? Yeah,
Maggie Lake 6:02
great. And we’re gonna, we’re gonna dive in a little bit, pull that lens out a little bit to look more deeply at some of this, but just kind of making our way around the market and the very short term reaction we’re seeing. Interestingly, equities are rallying, but so are treasury yields. Right? Yields are moving higher as well. Again, you know, what does that look like to you on the 10 year? Yeah, most
Mark Newton 6:26
of the Haven trades are being unwound as equities are rallying. So we have seen treasuries sell off as equities rally. Yields are pushed higher. We’re seeing the same thing with dollar yen, which has moved up. You know, many of the areas that were so called safety trades. People looking at exposure in Swiss Franc and or yen are now seeing those both start to reverse. Gold and precious metals have also backed off a little bit in the short term. So, you know, this is a short term sell off, in my view, in both the precious metals and also in fixed income. I’m actually a pretty big proponent of owning treasuries with yields up near these levels. I think they can go higher if you’re a short term in perspective, meaning 465, potentially 470, Max for the 10 year. But I’d be a buyer and adding duration and thinking that we are at a time when yields are going to start to turn back lower over the next few months
Maggie Lake 7:20
interesting, because that’s certainly not what we’re seeing today. Just want you to talk a bit more about the dollar, because, you know, we are seeing it surge, but it pretty much crashed last week against the Taiwanese dollar. Some of the moves in Asia. How are you thinking about the dollar? It does it feel like a short is this a short term move in a longer, more protracted dollar week story. Or again, does this maybe change the change the story a bit? I’m a little
Mark Newton 7:47
bit of $1 bear. I guess over the next three to six months, I do sense that the move is going to prove short lived, and the dollar likely starts to pull back. You know, it’s funny. The dollar’s been really selling off pretty sharply since the latter part of 2024 at a time when everybody thought tariffs would make the dollar go higher, and exactly the opposite happened, or the dollar was weakened. So, you know, it’s interesting. I think that the tariffs being potentially renegotiated has caused the Fed to start to pull their rate cuts out of the at least, traders have started to, you know, not fear as many rate cuts going forward. And so we only have about two now that are priced in for the year, versus about four as of a couple weeks ago, the dollar, I think, eventually, will start to regain its strength. I think the US, you know, I’m a big believer in US exceptionalism, and feel that if the world is going to weaken, you know, which, which could be a possibility next year into the years to come, we can talk about that, but I think the US likely is going to hold up in much better shape than Europe or really, abroad in many emerging markets. So near term, emerging markets have have sort of thrived, and it was interesting to me that we saw big rallies in Mexico and in China. Meanwhile, these countries are the sort of the recipients, the beneficiaries of these tariffs, and the US had been underperforming massively, and now we’re seeing that. We’re seeing some mean reversion, where the US is playing catch up rather quickly. So to make a short answer, long or vice versa, you know, I think a short term bounce is possible in the dollar, and some of that is yen, you know, certainly selling off a little bit. But in general, you know, my feeling is that the dollar is going to have one further move to the downside, which probably happens between now, meaning, you know, mid May and August, and that time, we see a further unwinding of yields in the dollar. You know, that would probably be a chance to go the other way. And
Maggie Lake 9:52
the last thing I wanted to ask you about, and it seems like this has this is important lately. What do you what’s the market that we should be watching? Watching for sentiment, because we’re seeing all of them on the move. But it seems like there’s been a lot of concern around treasuries. Something about the health of the Treasury market, the demand for US Treasuries, how quickly that yield moves. It seemed to be the thing that spooked the administration when it started getting up toward 5% are treasuries the lead dog here? Or does equity? Do equities matter, especially given this rebound we’ve seen, is there one market that’s going to sort of determine and set the tone here? Mark,
Mark Newton 10:27
I think it’s fair to say that the Trump put is very much alive, even if they don’t come out and publicly say it. And I think that Scott Bassett, you know, talked some necessary words into Trump’s ear at the time when rates moved up 50 basis points very quickly. You know, some of that could have been described as being basis trade unwind, but always a fear to see rates move up that quickly. But maybe make no mistake. I mean, this has not been a sell off. And I say sell off, but I mean, you know, February to April, where there have been a lot of dislocation in the fixed income markets, things have been remarkably calm junk yields had not really widened out as dramatically as we’ve seen in prior years. And so those were all reasons to think that, you know, things would largely be okay in the bigger scheme of things, until that really starts to show more evidence of volatility. And we did see that volatility in early April that coincided with rapid downside volume, and then, as we, you know, made it, I think, a necessary pivot that also coincided with yields starting to pull back. And so I, I think the obviously, the Treasury yields, we can’t see them get above 4.8% the prior highs, that would be a real worry. And I think that’s what would cause, you know, certainly some volatility. We would certainly be pressured to act. I think if we saw a rapid rising in yields, today certainly is a little bit of a backing up. But I don’t think it proves all that long lasting, not
Maggie Lake 11:55
close enough to the danger zone. Mark, fantastic stuff. Thank you so much. Thank you.
