The Rally May Run Out of Steam

vor 4 Tagen

Fundamental Background

According to CNBC, analysts at Morgan Stanley have conducted a study on how the tariff plans announced by Donald Trump during his campaign might affect the U.S. economy and the stock market.
Among the initiatives of the president-elect:

• Implementing a general tariff of 10% to 20% on all imported goods;
  
• Introducing additional tariffs of 60% to 100% on goods imported from China.
  

According to Seth Carpenter, the chief global economist at Morgan Stanley, such plans:

• May eliminate the possibility of interest rate cuts in 2025 and also limit economic growth;
  
• Threaten to reduce U.S. economic growth by 2026;
  
• Will lead to increased inflation;
  
• Will put pressure on the automotive industry, consumer electronics, machinery, construction, and retail sectors. It is expected that the costs to manufacturers will be passed on to consumers.
  

Consequently, this implies a negative outlook for the U.S. stock market as there is a high likelihood that the tariffs will reduce investment attractiveness and increase the cost of borrowing for companies, negatively impacting the stock market.

Technical Analysis

• In 2024, the price formed a broad ascending channel (shown in blue);
  
• Throughout October, the price was "magnetized" to the median line and formed a narrower channel between the Resistance and Support lines;
  
• Against the backdrop of the presidential elections, the price surged to a peak on November 11th, but then returned to the median line.
  

The line around 20,941 level briefly acted as support, but the price failed to sustain above it. Could the bears' attempt to break away from the median line's pull be more successful?

Cyclical Analysis

Cyclical Chart Predicts a Decline in the Nasdaq Index



Conclusions

While the chart currently shows no clear signs of bearish activity, the facts presented above suggest that the vigorous bull market observed throughout 2024 may run out of steam.