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Markets believe we are Inching Towards A China Deal

by Fortem Financial February 25, 2019

President Trump’s announcement last night delaying an escalation in China tariffs from going into effect on March 1 shows that we are moving towards a deal in the coming month.Trump is becoming more pro-growth and is looking for a deal ahead of his re-election. Avoiding the escalation of tariffs prevents an additional $50bn of tariffs from going into effect in CY 2019. We are having a harder time seeing a path to removing existing tariffs, which will be largely dependent on the Chinese making significant structural reforms. If a final deal is reached, we would not be surprised if the commentary downplays the changes made. Still, China tariff rates have fallen in one year and companies are being granted more access to the Chinese market. While a delay in tariffs is welcome news, a final deal needs to be completed soon for capex to move higher.

The equity markets edged higher last week as constructive comments from both the White House and Chinese trade representatives suggest progress in negotiations; also, Federal Reserve officials reiterated support for a pause in monetary policy.  For the week, the Russell 2000® Index gained 1.33%, followed by Nasdaq (0.74%), S&P 500® Index (0.62%) and the Dow Jones Industrial Average (0.57%).  The Russell 2000® recorded its longest weekly winning streak since 1996.  Vice Premier Liu met with President Trump last Friday as the Chinese delegation extended its stay in Washington.  Reportedly, they reached an agreement to stabilize currency values as negotiations on Memoranda of Understanding on key trade issues continued.  President Trump and President Xi will “probably” meet in late March “to work out the final points.”  

Wednesday’s release of Minutes from the Federal Reserve’s January meeting confirmed sentiment in support of a pause in interest rate increases and in the Fed’s Balance Sheet policy.  Brexit negotiations within Britain and with the European Union continue with little visible progress.  An emerging scenario suggests that a 3-month ‘technical’ extension might emerge if Teresa May’s deal, or a version of it, first gains approval by the House of Commons; the EU might then agree to the extension at its summit in late March. 

Earnings season is largely over; company narratives remain focused on trade negotiations and interest rates.  Economic data for January have been mixed; winter storms, the seasonal wild card, often distort first quarter data.  The market’s upward bias continues; and still, favorable updates on trade negotiations may provide additional momentum.  The year-to-date results for the Dow and S&P 500® (each up over 11%) are the best starts since 1987 and 1991, respectively.  Historically, when these indices move in sync through February, the trend continues through year-end 60% of the time.

Source:  Pacific Global Investment Management Company

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. 

 

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Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

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The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Forward looking statements are based on current expectations and assumptions, the economy, and future conditions. As such, forward-looking statements are subject to inherent uncertainty, risks, and changes in circumstance that are difficult to predict. Actual results may differ materially from the anticipated outcomes. Carefully consider investment objectives, risk factors and charges and expenses before investing. Fortem Financial is a registered investment adviser with the SEC. Advisory services are offered through Fortem Financial.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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