Unfortunate Headline of the Day!

Not the headline the market was looking for!

“Dow drops 200 points after Trump says China tariffs could stay on for a long period”

He also stated the following this morning: 

“the EU has been as tough on the U.S. as China”

On China, the President made abundantly clear that the pending deal will not immediately remove the newest round of tariffs. While that, if he stays there, by itself shouldn’t precipitate a global downturn — as a no-deal/escalation likely would (in my humble view) — it stands to, at a minimum, sorely mute whatever stock market boost we might get out of a deal. My base case is that such a deal (leaving in place newly implemented tariffs) will be a sell-the-news event.

While the market could rebound on the Fed’s announcement due at 11am, the above — if things play out as the headline suggests, and as the subsequent quote implies — are fundamental risks. 

The market’s reaction this morning is appropriate, and, thus, constructive (as such moves tend to get the powers-that-be attention and influence trade discussions), and could get worse (better in an attention-getting sense) before it gets better…


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