CFRA sets 12-month target, implying a 6.2% appreciation potential from the 6/18/19 close

US equity markets rallied sharply last week—due in large part to President Trump’s signaling that US/China trade talks were still on life support, not dead. His encouraging tweets in reference to the upcoming G20 meetings in Osaka and his planned meeting with China’s leader Xi Jinping effectively removed, at least temporarily, the largest variable that has hung over the market for months. As we have discussed, US/China trade is without question the largest variable for investors to price into risk. Without that variable, risk-on was the name of the game. Naturally, as a result, my calls for caution heading into the closing days of trading for Q2 went out the window last week. That happens when tweets come from the White House. The terrain can shift rather suddenly.

It was a great week for equity investors. For the week, the Nasdaq gained 3% while the S&P 500 rose 2.2%, the Dow Industrials added 2.4%, and the Russell 2000 was up 1.8%. Those gains came despite some themes that could potentially have generated a degree of selling pressure. There is an increasingly cautious outlook by the Fed, as framed in the FOMC announcement and Chair press conference. Iran shooting down a US drone, and the near miss in the Persian Gulf with Iran that ensued, all seemed to have little effect on the trade higher—even incrementally.

Last week’s trade higher in US equities was impressive. The clearest indicator of the strength of last week’s move can be seen in the number of new highs. Between the Nasdaq and the NYSE, the total was 453. That is the best tally in over a year. The broad strength fueled the S&P 500 to a record high close on Thursday.

WTI crude oil also gained meaningful ground last week (+10%)—due in large part to a downed unmanned US drone, tensions between the US and Iran, and a near-miss in terms of a military counter-strike by the US in retaliation.

In part, in response to the tensions and potential for military action in the Persian Gulf, gold rose to a 6-year high ($1,400.10/oz.). Also helping fuel gold’s weekly move higher were indications from the ECB that monetary policy would lean into a more simulative posture if the economy continues to slow.

In summary: equities rallied to a record close, WTI crude rallied 10% on Persian Gulf tensions, gold rallied to a 6-year high, and Q2 is rapidly coming to a close. We haven’t even discussed the rally that has continued in the US Treasuries. The US 10-year yield closed out last week at 2.05%. Over the past 52 weeks, the 10-year has rallied a staggering 84 bps. That rally has taken place despite relatively strong economic data over the period.