Bill Schmick | @theMarket: Memorial Day markets

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As we begin the Memorial Day weekend that usually launches the nation's summer season, investors are anxious to discover if Americans will ignore Centers for Disease Control and Prevention warnings, and go back to their old ways of celebrating the holiday. And if they do, will new cases of COVID-19 spike?

The reopening of much of America this week had been met with some celebratory gains in the stock market, but as I predicted, it has been an up-and-down week, despite the gain. The S&P 500 benchmark Index actually "kissed" 3,000 before falling back the following day. It was a first tentative probe of that level since the March declines.

However, if the S&P 500 Index can get through that resistance level over the next few weeks, we have a real chance to re-gain all of the remaining declines in the stock market. That's a big "if" and depends, as we all know, on future medical data. Investors will be watching, and their future actions depend on how successful the reopening the country's economy will be.

By now, most, if not all, the bad news on the economy, on corporate earnings, and the existing data on the pandemic have been discounted by the markets. Therefore, unless something sudden and terrible should arise on those fronts, I would advise you to ignore those headlines.

Instead, readers should pay attention to two developing trends.

The first one is the United States' reescalation of trade and political tensions with China.

My "Chinese checkers" column outlined my thoughts on this subject. Suffice it to say the Trump administration is doing all it can to shift attention and blame from the COVID-19 issue and its response to it. Focusing on "bad" China is both popular and easy, especially with elections only six months away.

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In addition, China has managed to throw fuel on that fire by proposing a new national security law in Hong Kong, during the annual meeting of the country's top legislative body, the National People's Congress, which began Friday. If passed, the new law would prohibit secession, subversion of state power, terrorism activities and foreign interference. Analysts

wonder whether the specifics of the law would allow security forces, or even mainland Chinese military forces, to quell demonstrations and the like.

Hong Kong, itself, has the power to self-rule. In 1997, Great Britain agreed to return its colony to China under a "one country, two systems" form of government. It is largely a separate legal and economic system separated from China with more freedoms and limited election rights.

Under the Sino-British Joint Declaration, China promised to maintain this system until 2047.

On Thursday, the State Department warned that "any effort to impose national security legislation that does not reflect the will of the people of Hong Kong" would be met with international condemnation. The president chimed in, warning China of a strong U.S. response if its government followed through on this new security law.

The second trend, also political, concerns the presidential race. As restrictions are lifted nationwide, both political parties are beginning to ramp up their campaigns. Media reports that the Biden campaign has shifted further to the left to include Bernie Sanders' supporters could alarm Wall Street. Sectors such as financials, health care, energy and technology would fare worse under a left-leaning Democratic party, according to prevailing wisdom.

Investors also fear that the Trump reelection strategy of further raising tensions with China could also damage what is already a weakened economy, as well as sentiment in the stock market. Given that a Trump reelection bid is no longer a sure thing, this combination of concerns could make this campaign season especially volatile for the markets.


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