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Opinion
Robert Burgess

Christmas Comes Early for Gullible Stock Bulls

Equity investors’ endless optimism leads market commentary. Plus, Argentina’s record-breaking rout and plunging cattle prices.

Sorry, investors. There’s no Santa.

Sorry, investors. There’s no Santa.

Photographer: Matt Cardy/Getty Images

The S&P 500 Index experienced its biggest intraday gain in more than two months on Tuesday after the Trump administration said it was delaying until mid-December the 10% tariff on some Chinese-made products that are high on many holiday-shopping lists such as phones and toys. Yes, it seems the stock market really is that gullible.

The reaction in equities suggests investors are betting the recent market swoon has persuaded President Donald Trump to de-escalate the growing trade tensions between the world’s two largest economies. Indeed, global fund managers pointed to the trade war as the biggest risk facing the market in the most recent monthly survey conducted by Bank of America Corp., which was released on Tuesday. “If the news is sustainable and indeed they are moving to a trade agreement, this is a very important development and we can go to new highs,” Bruce Bittles, the chief investment strategist at Robert W. Baird & Co., told Bloomberg News. But that’s the thing about the stock market — it’s built on optimism. Never mind that numerous past declarations by the White House that a deal was imminent have failed to come true, there’s always hope that this time is different. Still, this latest concession is likely too small to help boost corporate profits, which have stalled. Profits in the second quarter fell 0.7% from a year earlier, according to FactSet’s analysis of the 90% of S&P 500 companies that have posted results thus far. If that holds, it will be the second straight quarter that earnings have fallen, something that hasn’t happened since 2016. The outlook isn’t any better, with analysts forecasting another drop in earnings in the current quarter before a small, single-digit advance in final three months of the year.