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Deadlines spur action.
In markets, sentiment does too.
A flurry of commentary from President Trump and Treasury Secretary Scott Bessent between Tuesday afternoon and Wednesday morning spurred a rally in the stock market.
As Yahoo Finance’s Josh Schafer reported, this action signaled to some on Wall Street that the president was starting to “feel the market” as he did during his first term in office, using financial markets more like a scorecard reflecting the success of his economic policies.
For weeks now, the stock market has ebbed and flowed on one basic thing: trade-related headlines.
Wednesday’s action, which saw stocks moderate gains after Bessent made further comments clarifying the administration’s stance on US-China trade talks, shows this trend continues.
But the accumulation of negative information investors had digested since April 2 also helped prime the market to respond positively to this week’s developments.
At close: April 23 at 4:50:25 PM EDT
“Based on the daily news flow and our own client interactions, it seems that the pessimism among investors when it comes to the trajectory of US stocks has increased substantially in recent weeks,” BMO’s chief investment strategist Brian Belski wrote in a note to clients Wednesday.
“While we understand that it has been a challenging market environment the past few months and the scope of the recent selloff has been unsettling, it is important to note that not all market indicators are signaling further downside in the months ahead, despite what some pundits may be suggesting. In fact, some of our most tried-and-true contrarian indicators have recently plunged to excessively negative levels, which suggests to us that a solid price rebound may be on the horizon should history be any sort of guide.”
In other words, tariff-related comments from Trump, among others in the administration, may be pushing the stock market around. But the stock market also needed to be in a certain place to be pushed around.
The first — and most notable, in our view — factor that Belski calls out is the massively negative trend in forward earnings revisions.
In just the last few weeks, the ratio of rising earnings forecasts compared to all forecasts being issued has plunged to around 30% for the second fiscal year out. Meaning the majority of earnings forecasts being published for the year after next are penciling in lower profits than had previously been modeled.
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