The markets wrapped a wild week with massive gains.
The announcement of a "phase one" trade deal between the U.S. and China sent the Dow up nearly 319.92 points on Friday, while the S&P 500 rose 1.1% higher.
With earnings season kicking off in the coming days, four experts weigh in on what is on their watch list this week.
Alec Young, managing director of global markets research at FTSE Russell, says the U.S. needs to do away with tariffs for the markets to break out.
"We've been in kind of a trading range, but I think in order to break out of it and make new highs, you really need an end to the existing tariffs. That would be like a tax cut, basically something that's weighing on corporate earnings. We're going to go through a pretty weak corporate earnings season starting next week. The reason trade is so important is without a deal that ends existing tariffs, it's very hard to believe that the forecast for 10% profit growth for 2020 are realistic."
Jay Jacobs, head of research and strategy at Global X Funds, says investors are reaching their limits when it comes to volatility.
"Every day we see these two heavyweight forces duking it out in the markets. We see the Fed and central bank policy trying to support the markets and we see the trade wars; and you know sometimes negative, sometimes positive news as the other force. And what we're seeing from our clients is people are really losing patience with this kind of volatility. We see a lot of people looking for yield from any source because that's the way to get return in a flat or volatile market."
Clete Willems of Akin Gump says the United States–Mexico–Canada Agreement could have an even great impact than a China deal.
"I'm still hearing good things. In spite of everything going on with the impeachment proceedings and everything else, I'm still hearing good things about the engagement between the administration and the Hill. So USMCA though is important. In a lot of ways, the substance of that actually is going to be more economically meaningful in the short term than China and so that's an important one too. So, I hope we can get both of these in a more stable place, a little more certainty for our businesses and that will help the economy going into 2020."
Byron Wien of Blackstone Private Wealth says earnings have to improve before the market can see a stronger leg up.
"Look the market is always vulnerable to a 10% correction. But I don't think the market is overvalued here. At these interest rates, I think the [S&P 500] can comfortably trade above 3000. How much more above 3000 it can get to really depends on earnings. Earnings have been disappointing. I don't think earnings are going to be strong. I think we'll be lucky to get a 5% earnings improvement in 2020. So I think the market has limited upside, but it does have some upside."
