There was a lot to digest this week in terms of some solid earnings, easing trade tension between the U.S. and EU, and a rather disappointing housing market. However, if we take a closer look, perhaps it was the news that the Treasury market is about to absorb $119 billion of note auctions caused the bulls to regain confidence.
When President Trump stirred the pot by slapping tariffs on imports from some of America’s closest allies in Western Europe and questioning the very existence of NATO, most pundits pointed out how it could devastate the American hegemony in the Northern hemisphere.
Nonetheless, this week’s talks between European Commission president Jean-Claude Juncker and President Trump showed that we should probably have a little more faith in the guy who wrote The Art of the Deal as the EU finally gave in and agreed to reduce the trade deficit by importing more soybeans and natural gas from the U.S.
In summary, investors reacted very well to fantastic earnings reports from the tech sector and the issuance of $36 billion in five-year notes, prompting the flattening yield curve to take a hiatus that added the much-needed bullish momentum to major stock indices this week.
Be sure to check out our previous week’s edition here, in which investors closely followed what Federal Reserve Chair Jerome Powell had to say during his testimony to Congress.