The Uncertainties Are Fading — Now What?
Author: Greg Valliere
December 13, 2019
WON’T GET FOOLED AGAIN: So we have a China trade deal — an exceedingly modest deal, which apparently is an “agreement in principle.” That’s better than nothing, but excuse us for playing the holiday Grinch; the details of this deal aren’t clear.
BUT THE DETAILS AREN’T AS IMPORTANT for the White House as the stock market, which continued its astonishing 2019 rally yesterday, largely based on a sense that predictability will emerge for U.S. farmers and businesses that rely on China trade. That now seems likely — once we see the details.
CHINA TRADE HAWKS SCOFFED at the reported agreement yesterday. We heard from several skeptics who said, essentially: “We went through a year of mediocre economic growth just to get this wimpy deal?”
IN THE HOLIDAY SPIRIT, we applaud any deal that reduces trade tension and forces China to reform. But let’s be realistic: the reforms and may evade enforcement; China’s promised purchases of U.S. goods were long-anticipated; and this year-long struggle has produced deep antipathy between the two countries, which bodes poorly for any kind of sweeping Phase Two deal.
BUT IT’S A WIN FOR DONALD TRUMP, who’s enjoying the most remarkable month of his presidency. Never mind that the USMCA trade deal has encountered fierce Republican resistance, it was a win for Trump (even though enactment is many weeks away). Trump is close to a budget deal, and has won creation of a new Space Force and paid parental leave for federal employees. And as a bonus, he probably will take some credit for Boris Johnson’s stunning landslide.
AS FOR IMPEACHMENT, ALL YOU NEED TO KNOW is that Mitch McConnell stated yesterday that there may be no Republican defectors in the Senate, zero, hardly the 20 needed to oust Trump. Every member of the House and Senate knows how this movie will end — and among Democrats we’ve talked with this week, there’s a sense of gloom over the party’s presidential election prospects.
WHAT DOES THIS MEAN FOR THE MARKETS? For investors, the two remaining issues for 2019 were China trade and Brexit, and the outcome for both, while not certain, looks clearer this morning. This begs a question: is there any more upside news the markets can look forward to — or is it all baked in?
MARKETS ANTICIPATE, THEY BUY ON THE RUMOR, as Trump knows, and he has adroitly massaged market sentiment. But now what? We worry when we sense euphoria and an overwhelming consensus; does a market hangover loom after a party this giddy?
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.