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US Inks Tariff Deals with EU, Japan
The United States has established trade deals with major partners including China, Japan, and the European Union, leading to new highs in major US equity indexes. However, the stock market’s current state raises concerns about a potential ‘sell the news’ phenomenon, where investors may take profits following significant announcements. History suggests that August could be a tough month for stocks, especially in post-election years, where average declines range from -0.5% to -1.5% across major indices.
The Warren Buffett Indicator
The ‘Warren Buffett Indicator’ currently shows a stock market valuation ratio of 212% compared to GDP, indicative of historically expensive market levels. While this suggests caution, valuations are not always reliable as timing devices. The outcome of upcoming earnings from major tech companies like Meta Platforms, Microsoft, and Apple may significantly impact short-term market movements.
Bottom Line
With ongoing all-time highs, the possibility of a ‘sell the news’ event, historical patterns indicating a tough August, and concerning valuation signals, investors might consider a cautious approach as they navigate the current market landscape.
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