U.S. equities and stock exchange traded funds bounced back on Tuesday, trying to end a losing streak after the Trump administration’s failed attempt to pass a replacement for the Affordable Care Act.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were up 0.6% Tuesday.
After a number of weak sessions on concerns over President Donald Trump’s ability to pass through his economic agenda, U.S. equities rebounded on Tuesday. U.S. markets have rallied since the election on hopes that Trump would enact a number of expansionary policies like tax cuts, deregulation and fiscal spending, but his ability to pass through these changes came under question after the failed attempt to replace Obamacare in a Republican controlled Congress.
Nevertheless, many market watchers think the recent pullback was bound to happen sooner or later as a healthy part of the normal market given the surge in the recent rally.
“It’s a healthy part of a continuing, positive market,” Kevin O’Nolan, a portfolio manager at Fidelity International, who remains slightly overweight in equities, told the Wall Street Journal.
Most traders remain bullish overall as global economic growth and accommodative central bank policies around the globe may still fuel the economic expansion.
“It seems like as soon as the market pulled back, the buyers sitting on the sidelines decided they couldn’t take a chance of missing the rally and they jumped back in,” Dan Miller, director of equities at GW&K Investment Management, told the WSJ. “Stocks are still quite attractive compared to everything else out there.”
While the equities market has rallied on hopes of policy changes, the economy remains strong with improving fundamentals to continue supporting growth.
“This market is driven by two things – the hope of policy agenda getting put into place and improving fundamentals,” Art Hogan, chief market strategist at Wunderlich Equity Capital Markets, told Reuters. “Whenever you found out that the agenda might take longer to get put out, you’ve gotten some piece of economic data that reminds you that the fundamental backdrop is still strong.”
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