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With the S&P 500 hitting a record high on Monday, investors have been betting that a U.S.-China trade truce, solid earnings and favorable economic data would boost the market further. But some strategists pointed to potential pitfalls that could interrupt or end the rally.

Here are five rationales for the rally to continue and five reasons to be cautious.

REASONS TO BE BULLISH

EARNINGS BEATS - Two weeks into the third-quarter reporting season 77% of companies reported earnings per share that beat analyst estimates, according to data from Refinitiv that showed that analysts now expect a 1.9% year-over-year drop in quarterly earnings per share compared with the Oct. 14 estimate for a 3.2% drop. Granted, it’s early in the season but encouraging for at least some investors.

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“Once we get through this week and next week, as long as earnings are still in the same trajectory that we’ve seen over the last couple of weeks, that’s going to continue to support the market,” said Jack Janasiewicz, portfolio manager and strategist at Natixis Investment Managers’ Multi-Asset Portfolio Solutions group in Boston.

TRADE TRUCE - The United States and China have announced plans to sign a “Phase 1” trade deal when their leaders meet in mid-November, and the market rallied on Monday after U.S. President Donald Trump said he expected to sign a significant part of the deal ahead of schedule.

Since the trade war has weighed on global growth and created a massive overhang for stocks, positive headlines like Monday’s tend to whet investor appetites for risk.

“We’ve stopped escalation and the direction of travel is positive,” said Mona Mahajan, U.S. investment strategist at Allianz Global advisors in New York. She cautioned that relations between the world’s two biggest economies are often fickle. Investors were burned badly in May when an expected agreement fell apart.

RATE EASING - An overwhelming majority of investors are betting that the U.S. Federal Reserve will announce a cut to overnight interest rates after its meeting on Wednesday, according to CME’s FedWatch. Barring any surprise on that front, investors will likely focus any clues Fed Chair Jerome Powell gives about future policy. Janasiewicz expects a measured tone.

“As long as Fed cuts and doesn’t deliver too much of a hawkish forward guidance for December that’s good enough for the market to continue to grind up,” he said.

MANUFACTURING BOTTOM: With two rate cuts already under its belt so far this year, Mahajan says, the benefits from Fed easing may start to show up in economic data as soon as this Friday, when she expects the manufacturing Purchasing Managers Index to show signs of stabilization after two rough quarters.

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WARY INVESTORS: With many reasons to worry - a U.S. Treasury 2-year/10-year yield curve inversion, an aging bull market and uncertainty around the U.S.-China trade war - investors have sought protection in defensive sectors like real estate and utilities in recent months. And after a sharp sell-off in the fourth quarter of 2018, Janasiewicz at Natixis, said many clients are wary of squandering their gains for the year so far.

“That perversely is the reason I stay bullish. When everybody pushes their chips all in, that’s where I get worried,” he said. “As long as that kind of uncertainty hangs over people, that means they aren’t fully leveraged to risk. They can add more risk to the portfolio.”

REASONS TO BE BEARISH

EARNINGS AND OUTLOOK: While investors are relieved third-quarter earnings are beating expectations, UBS Global Chief Investment Officer Mark Haefele still expects a 2% year-over-year decline for the quarter. And David Lebovitz, global market strategist at J.P. Morgan Asset Management, said analysts’ earnings growth expectations for 2020 are way too bullish with his 3-5% growth estimate comparing with the consensus of 10%.

“You’ve consensus looking for margins to widen back out to north of 12% next year. We just don’t share that optimism,” said Lebovitz. “Top line growth is going to be somewhat restricted given the underlying fundamentals which makes it a little challenging to understand how margins are going to expand.”

SOMETHING’S GOTTA GIVE: While bullish investors are betting trade progress, improving data and an easy Fed can keep the market grinding higher for the short to medium term, Lebovitz doesn’t see this combination working for the long term.

“I’m not sure all four of those things can co-exist for an extended period of time. If the data gets better then the Fed’s going to potentially change their course,” he said.

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INDUSTRIALS AND THE CONSUMER: While the U.S. consumer has stayed strong, Oxford Economics Chief U.S. Economist Gregory Daco worried that a lingering industrial slump “is increasingly at risk of spilling over into the broader economy.”

He cited two big worries, either that strained businesses pull back on hiring, hours or wages or that business, consumer or investor confidence slumps due to recession worries.

YIELD CURVE INVERSION: The U.S Treasury 2-year/10-year yield curve is currently steepening but it did invert in the second half of August, and yield curve inversion is seen as one of the most reliable signs that a recession could be on the way.

POLITICS: The 2020 U.S. presidential election gives the incumbent, Trump, a strong motivation to find ways to support the economy and boost stocks, according to Mahajan at Allianz. But investors, who are wary of change, also need to consider the possibility that a rival such as Democrat Elizabeth Warren, could win. Leon Cooperman, chairman of Omega Advisors, told CNBC earlier this month the market could fall 25% if Warren is elected.

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