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S&P 500 Shows Early Signs of Bullish Movement Amid Tariff Fears

The S&P 500 recently triggered a Zweig Breadth Thrust signal, indicating potential market upside. However, trade policy changes under the Trump administration raise concerns for investors, urging a cautious approach.

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AI Rating:   7

Recent market activity indicates a cautiously optimistic outlook for the S&P 500, particularly following the triggering of the Zweig Breadth Thrust (ZBT) signal. This technical indicator has historically suggested a positive trajectory for the index, with an average 6-month return of 16% and a 12-month return of 24%. The last time this indicator was observed, the S&P 500 returned positively in each subsequent period. Such indicators, when closely analyzed, suggest that the market may rally significantly in the coming months.

Additionally, the index recently recorded three consecutive trading days exceeding 1.5% gains—the first instance since 1957. Historically, this bodes well for the market, showing an average gain of 21% over the following year. Thus, if this trend continues, the S&P 500 could potentially rise to around 6,637 within the next year from its current level. However, despite the bullish signals from these technical indicators, investors remain cautious due to the unpredictable elements surrounding U.S. trade policy under the current administration.

Trade Policy Concerns: The report highlights a significant upheaval in U.S. trade policy, including raised tariffs that are causing uncertainties regarding economic growth and consumer price impacts. The effective tariff rate is projected to land significantly higher, which could extend negative consequences across various sectors, including manufacturers and consumers. Such shifts are a growing concern as increased tariffs have been linked to slowing economic activity, diminishing profitability, and raising operating costs.

In conclusion, while technical indicators such as ZBT do suggest a potential upward shift in market performance, the overarching uncertainty regarding trade policies presents a cautionary tale. Investors might consider a selective approach, underlining the importance of evaluating company fundamentals and future earnings potential before making significant investment decisions. Industries and firms most likely to sustain favorable returns despite external pressures will remain attractive for committed long-term investment.

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