President Donald Trump meets his counterpart Chinese President Xi Jinping in Agentina this weekend, and a lot is riding on whether he can turn down the temperature on trade wars.
If the stock market is going to end the year with gains, it could all come down to this weekend and the meeting between President Donald Trump and China President Xi Jinping.
Stocks have been whipped by headlines on trade, and on Thursday alone the market was encouraged by comments from Trump that he wanted a deal but then disappointed when he said he wasn’t sure he would agree to one. Stocks also fell because of reports that Trump trade advisor Peter Navarro, a China hawk would be in attendance at the dinner meeting Saturday night. But then the market bounced on a Wall Street Journal report that said the U. S. and China were exploring a deal where the U. S. would hold off of further tariffs until spring, to allow for negotiations.
“The market is pricing in some degree of further escalation, breakdown of talks. If we have an agreement, then you price out the downside,” said Keith Parker, head of U. S. equity strategy at UBS.
Many analysts believe the two sides could announce they will negotiate, somewhat calming the market, but the U. S. will likely increase tariffs as expected, to 25 percent in January. Strategas Reseach gives this scenario 40 percent odds.
But if Trump agrees to hold off on increasing those tariffs, now 10 percent on $200 billion in Chinese goods and agrees to hold off putting tariffs on a wider group of goods as talks proceed, that could be a big positive for stocks.
