As CNBC breaking news reported this morning, US-China trade talks have hit a snag -despite saying they had an agreement in principle- and back to a stalemate- WSJ reported that China is hesitant to commit to a specific amount of agricultural products and US is trying unsuccessfully to secure a stronger concession from China to regulate IP protections and to stop the practice of forced tech transfer in exchange for rolling back some of the tariffs. So are we anywhere closer to a limited Phase 1 trade deal? We would have thought that the purchase commitment of US agri-products would be the low hanging fruit, but even that is seemingly remote now.
And despite this, the Dow closed at another record, seemingly now unperturbed by this latest trade deal development. To me, this is a concern. It will embolden the President (who is the only President to quote Wall St rise in his speech) to get tough in his negotiation, because "bad"news is not affecting the markets. POTUS does not believe the ongoing trade war with China is impacting the economy, citing recent good unemployment data (see video below) but the President forgets or probably is oblivious to the fact that many of the economic data are lagging indicators (refer to my Hussman posts).
Sadly the ASX may be more worried than Wall St about the protracted trade war. It comes down to the US thinking and believing now the threat of recession is now behind them (on a set of recent economic data) and Australians can see ourselves being subjected to a more challenging pathway for our economy going forwards the longer this trade war protracts. That US belief is a false sense of hope - the markets should be looking forward to what is likely to happen ahead and with the trade war not resolving, it won't be pretty, but instead chose to take comfort in a set of data that reflected the past. That defiance of conventional logic is probably what will define this current US market exuberance as the final melt-up.
