The 4 big factors driving the US markets up | Australian Markets

Here’s 4 issues I wish to share with you right now…

(1) We keep listening to that the US markets are “expensive” or “overvalued”.

But they keep holding round all time highs too.

If we choose by means of some current tales, it’s not onerous to see why, both.

First of all…have a look at this chart from Charlie Bilello. US company earnings are up 11% this 12 months…

(*4*)

Source: X

Compare that to the common Aussie market, the place earnings have gone nowhere for 3 years.

That jogs my memory.

I keep in mind sitting down with my colleague Greg Canavan in March after we chatted over the tariff query at the time (the video continues to be accessible to Fat Tail paid subscribers).

I recall saying that the tariff concern could be a repeat of Trump’s first Presidency. It would flare up and spook everybody for a bit, then we’d all transfer on.

That’s just about what’s occurred since.

There’s merely an excessive amount of money roaring by means of the big tech stocks for the market to dive round trade points (but, anyway).

Plus, Trump has prolonged the reprieve on China tariffs for one more 90 days.

What else can we see?

(2) Trump’s “Big Beautiful Bill” goes to juice company America’s free money circulate.

Check this out from the Wall Street Journal…

“In short, changes like allowing upfront depreciation of assets and immediate expensing of research-and-development expenses will bring swift windfalls to American corporations but also lasting tailwinds. This in turn has provided incremental fuel to stock markets, a counterweight to risks from tariffs and other policy uncertainty.”

We’re speaking severe coin right here.

One estimate places it close to US$150 billion that’s staying with the firms and never going to the US Treasury.

That’s not all…

(3) Both the above mixed imply US firms can use this money to buyback stock…and that’s what they’re doing.

See this additionally from the Wall Street Journal…

“American companies are repurchasing their shares at a record pace, boosting their balance sheets and fueling the U.S. stock rally.

U.S. companies have announced $983.6 billion worth of stock buybacks so far this year, the best start to a year on record, according to Birinyi Associates data going back to 1982. They are projected to purchase more than $1.1 trillion worth overall in 2025, which would mark an all-time high.”

And as a closing kicker…

(4) Now now we have the Fed extremely prone to cut rates of interest, based on Reuters…

“The likelihood of a Federal Reserve rate cut in September is now seen near 100% after new data showed U.S. inflation increased at a moderate pace in July and “Treasury Secretary Scott Bessent said he thought an aggressive half-point cut was possible given recent weak employment numbers.”

Those are 4 highly effective tailwinds, and clarify why US stocks have surged out of the April low.

The query now: is all of it priced in?

I’d recommend yes. So I’m not sure how a lot more the US can keep powering up.

That mentioned, there’s no motive to get unduly bearish both. And that’s superb.

A strong, regular market is enough to keep the Aussie market in good condition too.

Perhaps one space of concern for the USA is how dependent it’s on the technology sector.

Some even argue that the US is in a “redneck recession”…the place Wall Street and Silicon Valley are superb and dandy however a lot of the nation is getting left behind.

See this from the Telegraph…

““Manufacturing is in recession. Construction is in a deep recession. Transportation and distribution is in recession. Wholesaling is in recession. Retail is holding on by its thumbs, it’s very close,” says Mark Zandi, chief economist at Moody’s Analytics.

It all comes back to the similar factor. US tech is now going all in on artificial intelligence.

It’s the solely sport on the town.

AI is the future of the markets, in more methods than one. Where AI goes, no one is aware of. But we’re going to seek out out.

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Source: Tradingview

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I haven’t bothered to offer you any updates on oil for the previous few months as a result of it has been caught in no-man’s land.

After the current spike above US$80 in Brent crude oil, the sellers stepped back in and the price collapsed beneath $70 and has sat round that degree since June.

We both need to see a month-to-month close above US$75.43 to substantiate a month-to-month buy pivot, or a soar above US$80-82.50 to change the present bearish outlook.

We have now seen 5 retests of the 20-month shifting average which have failed. In different phrases, the long-term downtrend is properly and actually entrenched.

A failure beneath the low of the entire downtrend close to US$58 would spell hassle with little help beneath that degree till US$46.50.

With the risk of as stop fire in the Russia/Ukraine battle on the playing cards, there could also be a strong catalyst evolving that would see oil costs drop sharply.

I stay bullish for the prospects of oil long-term so see any coming collapse in the oil price as a shopping for alternative.

All advice is common advice and has not taken into consideration your personal circumstances.

Please search unbiased financial advice concerning your own state of affairs, or if unsure about the suitability of an investment.

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