SPY: Wile E Coyote Moment On The Horizon
Summary
- I maintain my sell recommendation as S&P 500 valuations have returned to bubble-like levels, with forward P/E at 22x and sentiment at 'Extreme Greed'.
- The recent truce in the US-China trade war fueled a market rebound, but risks from escalating tariffs remain high and earnings forecasts are being cut.
- Markets are complacent, betting on Trump's tendency to back down ('TACO trade'), but this time he may follow through with new tariffs, risking a sharp correction.
- If tariffs go into effect as scheduled, the S&P 500 could face a 'Wile E. Coyote' moment, with significant downside risk in the coming weeks.
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