Trade war will not stop the SP500 to end the year with +5% growth

While the headlines on the internet, television and the cult Wall Street newspapers are obsessed with the obsession with the trade war, the SP500 seems live in a parallel universe. If we compare the fall in the index with the last 4 market retracements of about 10%, this year's "crash" is nothing different from the previous ones. This, along with relatively good financial statements, puts the index on its way to a new peak in the early days of August.

Is it reasonable to think that this will happen? Most likely, yes. SP500's annual return reflects changes in the US ISM Production Index. Given that the commercial tariffs have not yet significantly affected economic data, it is quite normal to think that a new peak in August is entirely probable.

On the graph below, we can track the long-term correlation between US Manufacturing ISM and SP500. It seems that even during market crashes the correlation remains stable.

Technically, the price of the index managed to overcome the upper limit of medium-term consolidation, and at the moment it seems that there is nothing to stop it at the previous peak at around $ 2880. Given the pressure on the dollar, as well as the good financial reports, I expect very soon to watch All Time High. On the basic chart, we can also track the projection of the Manufacturing ISM by the end of the year and where is the current price of the index. August forecast data shows that at the end of the month and early September, the SP500 will be close to the previous peak, and the next reporting season will be key to the index.

Source: Bloomberg Pro Terminal

Chart: Used with permission of Bloomberg Finance L.P.

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