The G-20 meeting in Osaka, Japan has concluded and with it the talks between Presidents Trump and Xi. The world is now left with an indefinite trade truce. Neither side is increasing or decreasing their respective tariffs, but talks are set to continue. Last time these two leaders met from their G-20 meeting in Argentina, a 90-day deadline was established to get a deal struck before further tariffs would be levied from the US side. This time, however, there is no new deadline. While President Trump has stated that the meetings went better than expected, the Chinese media was reporting that there is a long road ahead before reaching a deal. If we enter into a war of the words between the US and China – who will the world and the markets believe? On a domestic front, Senator Kamala Harris went after former VP Joe Biden in round two of the debates and has received some praise and some criticisms. Regardless, it remains the opinion of The Kapital News that Senator Harris is going to be a formidable candidate on the Democratic side – the subsequent media coverage of Senator Harris is further evidence in our corner.
The G-20 meeting in Japan is underway and all eyes and ears are awaiting the conclusion of the trade talks between Presidents Trump and Xi. It has been reported today that President Xi will present his case for what the USA needs to do to reach a trade truce at this juncture. These bullet points highlight the divide between the two nations and it will be near next to impossible for President Trump to acquiesce to these demands. They are centered around removing the ban that the US has placed on Chinese tech firm, Huawei. This company has been and is considered a national security threat to the US – so how can Trump simply put this aside? Next, China wants all punitive tariffs removed – again, same question as above considering how “effective” President Trump claims they have been for the US. It must also be considered that a major sticking point from the US side is that the Trump administration wants an enforceable deal – wouldn’t this imply that tariffs will remain in tact to some degree until the Chinese make good on the agreement? Lastly, President Xi is expected to tell President Trump that the US needs to remove the demand that China needs/has to buy more US goods and services. This will be another challenge to President Trump as he has promised farmers and ranchers a great deal with China, thus increasing the sales of their crops and livestock. So the question remains – is the trade war ending this weekend, or just getting started?
Another trading day and another headline. Yesterday was a down day for the markets – nothing dramatic, but down nevertheless. Well, President Trump can’t have that and so we’re back on the bandwagon with statements being made. Both the President himself and the Treasury Secretary, Steven Mnuchin were out earlier today giving interviews with Fox Business and CNBC, respectively, and discussing the US/China trade talks. Of course, the markets interpreted the statements and the headlines as a net-positive and thus stocks rallied early on. However, as has been discussed at length here at The Kapital News, how much longer can the boy cry wolf? How much longer until diminishing marginal returns kick in on the effectiveness of saying something “positive” about trade negotiations? Markets are supposed to find fair-value. This has been a near impossibility with all of the lever-pulling by central banks the world over and from statements and actions undertaken by President Trump and his administration. What will be tomorrow’s headlines?
The markets will most likely continue to trade range bound for the week as participants are awaiting the conclusion of the G-20 meeting in Japan – mainly the discussion between Presidents Trump and Xi. Nevertheless, the markets today heard again from Jay Powell, Chairman of the Federal Reserve, where he made comments indicating the “independence” of the Fed by declaring that the Fed is “insulated” from short-term political pressure. Of course he was referencing the many attacks from President Trump and his administration, where they have been calling-out the Fed for not cutting interest rates like the rest of the world. Even so, we have President Kaplan of the Dallas Fed stating that a cautious approach would be prudent, as he sees the possibility of lower interest rates causing excesses and malinvestments. WOW! Exactly what The Kapital News has been saying since our existence. Too little, too late for the Fed, but hey, at least they’re finally make some sense (not really). Of course the markets sold-off today on the back of these comments from Powell and Kaplan because the markets viewed it more a touch of the hawk as opposed to the dove.
At the G-20 meeting in Japan later this week, global leaders from the world’s largest economies are set to make headlines. Front and center will be the get-together between President Trump and President Xi. In the midst of an escalating trade war, the two leaders are finally set to meet to size each other up. What will transpire is anyone’s guess, but the markets are hoping for good news so that stock prices can continue to rally. The Kapital News isn’t so certain of any good-to-great news other than President Trump likely tweeting or commenting that things are “great.” Well, we’ve heard this song and seen this dance before, so forgive us if we don’t take the President at his word on this one anymore. Both nations have much to gain and much to lose. However, we are talking about two world leaders that like to exude a “strong-man” figure, so it’s unlikely that either will cave-in to the other’s demands easily. Escalation? Truce? Or deal? We’ll soon find out – stay tuned to The Kapital News.
