Two Key Factors That Could Drive the Stock Market This Week

September 30, 2019
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Political news had a significant impact on investor sentiment last week, leading some investors to trade cautiously on Thursday and Friday. Two of the most important news items; the impeachment investigation into Donald Trump and the potential of blocking Chinese stocks on U.S. exchanges, both contributed to slight single-day declines on Friday.

  • The NASDAQ Composite (COMP) was down -1.13% at the end of Friday trading.
  • The S&P 500 Index (SPX) was down -0.53%.

Although impeachment will remain an issue for the foreseeable future, the blocking of Chinese stocks seems to be off the table, at least for now.

Here’s what could drive markets from Monday morning onwards.

Chinese Stocks Won’t Be Blocked by the Treasury

Last week’s news that the Treasury could block Chinese stocks derailed growth on Friday, but it was revealed over the weekend that such a move is not likely to happen.

Monica Crowley, the Assistant Secretary for Public Affairs at the U.S. Department of Treasury, tweeted on Sunday that “The administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time. We welcome investment in the United States.”

Although U.S. stocks are driven by domestic companies, Chinese stocks have become more viable in recent years, due to an explosive economic growth cycle that is now slowing down.

The Alibaba Group (NYSE: BABA) is one of the largest. The retail and wholesale eCommerce company has a U.S. market capitalization of $432.14 billion. This stock and others like it could see more confidence now that the Treasury has clarified its position.

Will the Impeachment Inquiry Impact Stock Markets?

Democrats launched an impeachment inquiry into President Donald Trump after a whistleblower released allegations that Trump had pressured the Ukrainian President into investigating political rival Joe Biden.

Although only an investigation at this stage with no proof of wrongdoing, this news is already dominating the headlines and destabilizing the political climate in Washington. Some Republican lawmakers have already broken the party line to criticize the President in relation to this issue.

A potential impeachment hearing could leave investors cautious about the economic future. GDP is slowing down and a scandal in the White House and Congress could sap resources. Nobody’s predicting a crash in the markets at this stage, but impeachment is still a realistic headwind that could cause volatility in October.

Investors are advised to follow all political developments and make stock decisions based on available data, financial performance, and the inherent potential of targeted stocks/companies.

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