USMCA And US-China Trade Deal Sends Stocks To New All-Time Highs

Stocks closed modestly higher on Friday, and solidly higher for the week, hitting new all-time highs in the process.

The week was full of positive trade news.

First we heard that there was finally a deal on USMCA. The House is expected to bring it to the floor for a vote this week, where it should easily pass with strong bipartisan support.

Then we heard that an agreement was reached between the U.S. and China for their long-awaited phase one trade deal.

These historic agreements are expected to usher in a wave of new prosperity, not just for the U.S. and the respective trading partners, but for the global economy as well.

The good news kept coming as Congress also agreed on a spending bill(s) to fund the government and avoid a shutdown. With the December 20^th deadline fast approaching, and the shrinking number of legislative days left in the year, there was concern over whether a deal could be made in time. But a deal was reached in principle, and the President said he would sign it when it reaches his desk.

We also heard from the Fed last week where they left interest rates unchanged, and indicated they would keep rates where they are throughout 2020. To many, that was a clear signal that the economy is doing well, and likely to strengthen even more given the underlying fundamentals and upcoming trade deals -- so there's no need to cut rates any further. But also, no need to raise rates either given the benign inflation readings at present and looking forward.

So the economy seems to be in a sweet spot right now with strong growth, 50-year low unemployment, surging corporate profits, and household income at the highest level in 20 years.

That's why stocks keep hitting new highs.

And since the economy is looking even better next year, there appears to be a lot more upside to go.

These are historic times for the economy and the market.

And that means an historic opportunity for record profits.

So make sure you're taking full advantage of it.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research

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