This headline was from seven months ago, at the cusp of a "deal". Today, nowhere near a deal, and only 45% chance of a deal between now and the end of the year.
It appears that Wall Street's unanimous expectation for a trade truce was no accident. One of the side benefits of Treasury run by Goldman Sachs.
Trump said: “We’re taking in a fortune, and frankly [it’s] not a very good thing for China, but it is a good thing for us."
The business community by and large disagrees...I don’t see any path to a deal and we’re stuck with 25% tariffs on $250 billion of goods.”
The issue of intellectual property remains a key sticking point despite the agreement to restart trade talks...The Eurasia Group, for its part, sees only a 45% chance that a trade deal gets done this year"
Last November, that truce led to a fleeting RISK ON rotation to beaten down cyclicals (banks, transports, energy, industrials), EM stocks, and of course semiconductors. How long that party lasts is anyone's guess. The last time it lasted a few hours on Monday:
The longer-term implications of this renewed truce is that the recently escalated trade war drags on indefinitely with no resolution in sight. Meanwhile, it vindicates the Fed's "patient" approach and lessens pressure on them to cut rates in July. All of which means double bad news for Trump's 2020 election rigging gambit, because it puts no additional pressure on China to settle the trade war and no pressure on the Fed to cut. The slow steady bleed through to the economy and corporate profit will continue.
"Seven of the 11 sectors have seen more companies issue negative EPS guidance for Q2 2019 relative to their five-year averages"
The net effect of this latest "truce" - is that it locks in tariffs at the new higher level set in May. Meaning May was the escalation selloff and June was the "trade war hopium" rally which vaulted the casino to the best first half since the Asian Financial Crisis imploded the second half of the year. The net result is that gamblers bought an escalation in the trade war with both hands.
Only the Casino-Croupier-in-Chief could pull something like that off. It reminds me of the TARP bailout rally. A lot of short-covering in the face of very bad news.
"Best first half since the Asian Financial crisis"
"Stock analysts overall are sanguine, predicting earnings will grow 6.7% in the fourth quarter and in double digits early next year...that forecast hinges on a sweeping trade deal with China"
Re: First article above:
"The Eurasia Group, for its part, sees only a 45% chance that a trade deal gets done this year"
I was starting to wonder, how much of this recent ramp was algos painting the quarter...
"This means so much of stock trading is now in the hands of automated buyers and sellers that the market is increasingly sensitive to headlines and more prone to sharp price swings"
Passive funds have attracted $39 billion of inflows so far this year, whereas active funds lost a whopping $90 billion in 2019"
