China Trade Roller Coaster is Headed Upward
Author: Greg Valliere
October 11, 2019
THE BIGGEST POLICY ISSUE FOR THE MARKETS has nothing to do with impeachment or Rudy Giuliani. It’s when the pervasive uncertainty over China trade will begin to subside, which would give farmers, businesses and the Federal Reserve some much-needed clarity.
THE MARKETS HANG ON EVERY STATEMENT FROM WASHINGTON on a trade deal, so today’s meeting between Donald Trump and Chinese Vice Chairman Liu will be important. Our bet is that both will proclaim that progress is coming; a piecemeal deal may be back on track.
THERE’S PLENTY OF LOW-HANGING FRUIT: An announcement — as early as today — would focus on the easy stuff: promises by China to buy more U.S. energy and agricultural products, a pledge by China on currency manipulation, a potential freeze on new U.S. tariffs, set to take effect on Oct. 15 and Dec. 15, and a controversial U.S. pledge to allow American companies to deal with Huawei.
THE TOUGH STUFF — including Chinese intellectual property theft and its subsidies to state-owned companies — may require many more months of negotiations, and creating an iron-clad enforcement mechanism will be a daunting task.
BUT THE MESSAGE TO THE MARKETS could be as follows: this enormous negative may not get worse, and upcoming new tariffs may be postponed. Even if a deal later this year is less than sweeping, a piecemeal agreement would be extremely positive for the markets — perhaps still another reason why a recession is not imminent.
TRUMP BADLY NEEDS A TRADE VICTORY as he slips in the polls and infuriates Republicans with his abandonment of the Kurds. This particularly bad week for him has been capped by the arrest of two shady characters linked to Rudy Giuliani, who is considered an albatross by most Republicans.
SO NOW THERE’S STILL ANOTHER angle to the Ukraine story, with speculation about plea bargains and tape recordings. Thus for Trump, even a hint of a China trade deal would make good political sense. No one can spin like Trump, and we suspect he will spin today that real progress is coming on trade. The devil, of course, will be in the details.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI is registered as a portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2020 AGF Management Limited. All rights reserved.