Is the trade deal looking like resolving? The US markets voted rather unanimously so, but perhaps they are letting their guard down.
I have borrowed a post from New Beginning that now shows we are getting to the highs in the Greed Factor - optimism and fragility are a hair's breadth and fragility can suddenly be back if once again the market's optimistic expectations on the trade deal proved to be unfounded and misplaced.
'I haven't agreed to anything': Trump throws cold water on China trade deal
Speaking to reporters, Trump said the US has yet to agree to wiping tariffs, undercutting a statement from China's Commerce Ministry indicating openness to such a concession as part of the first phase of a trade deal between the world's economic superpowers.
"They'd like to have a rollback," the President said. "I haven't agreed to anything. China would like to get somewhat of a rollback, not a complete rollback because they know I won't do it."
The tariffs have been a major sticking point in the negotiations between the two countries, and the latest twist sent stocks falling -- a repeat of earlier episodes in which Trump himself injected uncertainty, even as breakthroughs in negotiations seemed imminent.
It's been almost a year since Trump and Chinese leader Xi Jinping announced an imminent deal after a meeting in Buenos Aires, Argentina. But in the ensuing months, both sides have settled into a tit-for-tat pattern, rattling markets and depressing business investment -- a major drag on the US economy.
The repetitive script of these on-and-off negotiations had close observers skeptical of positive signals from both sides even prior to Trump's comments on Friday.
"We've learned with these negotiations they're not done until the ink is dry and then it's filed, and even then you still have to wait a little while," said Scott Kennedy, deputy director of the Freeman Chair in China Studies at the Center for Strategic and International Studies, a Washington think tank. "I'm still not convinced that it's a done deal."
UBS economist Robert Martin warned in a note to clients earlier in the week not to "place hope before expectation" as signs pointed to a delayed meeting in December between Trump and Xi.
"We have long noted that signing a comprehensive deal could prove elusive and we now have confirmation that signing even the skinniest of trade deals is proving problematic," said Martin. "We suspect the delay in signing reflects the fundamental disagreements over the scope and content of phase one."
In recent weeks, the President's own advisers have been urging Trump to deescalate trade tensions with China or else risk damaging the US economy and his re-election bid in 2020.
"Our advice was get the best deal you can get now because once you get a deal signed the economy will be unleashed," said Stephen Moore, a former CNN contributor and distinguished visiting fellow at the conservative Heritage Foundation who was briefly considered for a seat on the Federal Reserve Board earlier this year. "It's the only thing that holding growth back right now."
Manufacturing and capital investment have languished as a result of the uncertainty of the trade war that has roiled markets for the better of part of 2019. Since the early days of trade talks, American businesses have sat on the sidelines taking a wait-and-see approach on whether Trump would be able to successfully rewrite the trading rules with China, protect their intellectual property, and stop Beijing from forcing US companies to hand over their technology.
Such uncertainty brought on by the Trump administration's erratic trade strategy has slowed the economy, keeping the President's goal of annual 3% economic growth out of reach just one year before voters head to polls in November.
It's also cost Americans an additional $38 billion due to tariffs slapped on everyday consumer products, according to new data released by Tariffs Hurt the Heartland this week, and forced the Federal Reserve to slash interest rates three times this year to insulate the economy from a possible downturn.
And while US and Chinese negotiators may be on track to closing in on a slim trade deal, it will likely fall short of achieving long-stated goals by the Trump administration.
"If the administration had done nothing on China policy, we'd be at the same place we are now or maybe even better," said Kennedy. "A Daoist approach of 'do nothing' may have been more effective."
CNN’s Fear and Greed index have soared to levels not seen since 2017, indicating that US stock market investors and traders will do better to wait for a correction before buying stocks.
The Fear and Greed index takes six different stock market gauges and combines them to one measure to better understand and quantify the mood of investors. It helps to know when markets are oversold, and also when they are overbought.
The indicator is good in hinting when market bottoms are near, and we provided an update last month when it was hinting a low was near. Since then, the S&P 500 index has risen by 6.72%, while the drawdown over the period was just 0.44%.
My research and usage of the indicator tell me that it is less good at predicting market tops. However, the speed of the last few week’s gains in the S&P 500 and the sharp rise in the Fear and Greed index are hard to ignore.
