Bumps in China-U.S. Trade Resolution Spook Markets


Any relief that investors felt after the early December announcement of a 90-day trade war truce between U.S. and Chinese leaders at the G-20 summit in Argentina evaporated in just 24 hours when tensions between the U.S. and China once again ratcheted up.


The agreement reached by Presidents Donald Trump and Xi Jinping reportedly called for the U.S. to leave tariffs on more than $200 billion worth of Chinese products at 10 percent while waiting at least 90 days before raising the tariffs to 25 percent, allowing the two countries to move forward with talks, according to the White House.


The White House said China would purchase an undetermined, “but very substantial, amount of agricultural, energy, industrial, and other product[s] from the United States to reduce the trade imbalance between our two countries.”


“This was an amazing and productive meeting with unlimited possibilities for both the United States and China,” Trump said in a news release. “It is my great honor to be working with President Xi.”


But days later news surfaced of the arrest of Meng Wanzhou, chief financial officer of the Chinese tech giant Huawei. Meng was arrested in Canada and was expected to be extradited to the U.S. on charges of violating U.S. sanctions on Iran, sparking outrage from China.


The arrest, along with renewed rhetoric over tariffs from the Trump administration, sent markets into a nosedive. The Dow fell 799 points on Dec 4, then was down by a similar amount two days later before recovering much of the losses before closing.


Conclusion


As we’ve said throughout 2018, the negotiations with China are, and will likely remain a bumpy, extended ride. A lot can happen in the next 90 days, and therefore short-term major market reactions are often overblown. We believe it is likely a deal will be reached, and there will be both winners and losers. This makes focused stock selection even more critical for investor success, and we remain focused on evaluating our holdings relative to the potential outcomes of the negotiations.


We expect the market to smooth out over trade until the next big rhetorical storm.

Disclosures
 

The views expressed herein are the current views of Miles Capital as the stated date and are provided for informational purposes only. They are believed to be correct, but accuracy and completeness cannot be guaranteed and should not be relied upon for legal or investment decision purposes. All expressions of opinion and predictions presented are subject to change without notice. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is not a guarantee of future results. Diversification does not ensure a profit or protect against market loss. As with all strategies, there is a risk of loss or all or a portion of the amount invested.

Contact Us


1415 28th Street, Suite 200
West Des Moines, IA 50266
Phone: (515) 543-8400
Toll Free: (800) 343-7084
inforequest@miles-capital.com

  • LinkedIn - White Circle

DISCLOSURES: The information provided herein is furnished by Miles Capital, Inc. solely for informational purposes and is confidential. It may not be reproduced or distributed to anyone else without prior consent. This document contains the current views of Miles Capital and is not intended to be, and should not be interpreted as, a recommendation of a particular security, product, or investment strategy. Such opinions and predictions are subject to change without notice. The strategies described in the presentation may not be suitable for all investors. There is no assurance that any of the objectives described will be achieved. This information contained herein does not take into account the particular investment objectives or financial circumstances of any specific person or entity who may receive it. You should consult your tax or legal advisor before making an investment, and investors are advised to thoroughly and carefully review financial, legal, and tax consequences of all investments to determine suitability. Investments in alternative assets may be illiquid and present significant risks. Past performance is not a guarantee of future results. There can be no guarantee that any investment strategy discussed in this Presentation will achieve its investment objectives. As with all strategies, there is a risk of loss of all or a portion of the amount invested. Diversification does not ensure a profit or protect against market loss.