The expected positive start to Monday's trade could be extended for most of this week as the latest economic data and the federal budget are likely to give risk assets a nice boost.
The S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index has already chalked up an impressive 9.5% in the March quarter with China-exposed stocks leading the charge higher among the large caps.
The Fortescue Metals Group Limited (ASX: FMG) share price is the best performer since January with a 71.7% surge, while the A2 Milk Company Ltd (ASX: A2M) share price and Rio Tinto Limited (ASX: RIO) share price takes out the second and third spots with gains of 29.7% and 25.4%, respectively.
Improving economic outlook
The rebound in China's official Purchasing Managers Index (PMI) on Sunday is likely to keep ASX companies with large Chinese earnings exposure in investors' good books as the index recorded its biggest increase since 2012 to 50.5 in March from 49.2 points last month. A reading above 50 indicates expansion.
The improvement in manufacturing gels with other recent Chinese economic data like business confidence and stronger Chinese equity prices, according to Bloomberg.
The positive data runs contrary to bond markets, which have been signalling a possible global recession led by the US.
Australia will have a chance to contribute to this debate as it will release its PMI, dwelling prices and business conditions and confidence data sets today.
A bigger share market catalyst?
But it's tomorrow's federal budget that will be a more important event for risk assets as the federal government is likely to hand out election sweeteners from overflowing government coffers ahead of next month's elections!
Any election sweetener that encourages consumer spending and business investment will be warmly received by ASX investors!
What's more, we probably won't have to worry too much about the Morrison government losing the upcoming election too as Labor will also be looking to counter any handouts with gifts of its own.
Foolish takeaway
In fact, a Labor win could be better for domestic consumption as its policies tend to favour those who are more economically disadvantaged, and history has shown that the poorest consumers tend to spend than save any income boost they may receive.
That may be good news for ASX retailers navigating turbulent waters but I don't think this is time to be adding on risk to your portfolio – whether in the retail sector or otherwise.
This is more so for those who are overweight on equities like I am. I am looking to capitalise on any market rally to take profit off the table and move back to "equal weight" on ASX stocks over the next two to three weeks.
