Monday, 21 October 2019

While Brexit drama continues, US stocks could hit new records

The drama over the UK's departure from the European Union continued over the weekend.

Members of Parliament voted on Saturday to withhold their backing to the revised withdrawal agreement Prime Minister Boris Johnson struck with the EU last week until the legislation needed to ratify it has passed, forcing him to seek a delay of Brexit beyond 31 October to abide by the law.

Johnson subsequently sent an unsigned letter to European Council President Donald Tusk regarding the delay request, followed by a signed letter stating that he was not seeking an extension to the Brexit deadline.

While Europe remains focused on the Brexit drama, investors in the US may push the stock market to new records this week.

“You’ve got the potential for a combination of things that drive us to new highs,” said Art Hogan, chief market strategist at National Securities.

John Augustine, chief investment officer at Huntington Private Bank, said the “narrative” around trade had gotten “so one-sided to the negative side, there may be a better chance than not that a phase-one deal is signed.”

“If corporate earnings show signs of resilience, especially by the U.S. consumer, then a run to new highs is by no means out of the question,” Tom Essaye, founder of The Sevens Report, said in a note.

“Global leading growth indicators might have bottomed, the Fed appears on track to offer a third “insurance” rate cut, sentiment is cautious and credit still flowing,” noted Michael Santoli at CNBC . “The setup has improved, suggesting it’s now becoming the bulls’ game to lose.”

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