As the U.S. and China resume trade talks following the highly anticipated G20 summit, the Dow Jones and the rest of the U.S. equities market have shown strong recovery.
In the past 30 days, the Dow Jones has rebounded from 24,819 points to 26,599 points, recording its best June in 81 years.
The U.S. has paused the imposition of additional sanctions on Chinese goods and China is set to begin purchasing American farm products in the upcoming days, opening the conversation for a potential comprehensive trade deal.
Full trade accord unlikely but improving sentiment likely to fuel Dow Jones
Due to intensifying geopolitical risks, major economies in the likes of Australia and the eurozone have either already cut their benchmark interest rates or are planning to do so shall the slowdown of global economic growth continue.
On June 9, Reuters reported that European Central Bank (ECB) policymakers are open to dropping its policy rate if the eurozone struggles to revitalize as a result of the trade war.
“If inflation and growth slow, then a rate cut is warranted,” one source told Reuters.
With major economies gearing toward a rate cut in the near term, strategists including Evenflow Macro’s Marc Sumerlin said that the Fed is too tight and that a rate cut is expected to occur in July.
The expectations of a rate cut in the upcoming weeks and improving sentiment around the trade talks between the U.S. and China could act as catalysts for the ongoing rally of the Dow Jones and U.S. stocks in general.
Stephen Guilfoyle, President at Sarge986 LLC, said in an interview with Fox Business:
“Drivers [of the rally] would be a change in the perceived trajectory for monetary policy,