1/31/19
Foreign data came in mixed overnight, with China’s PMIs suggesting that its slowdown may be finding a bottom, and Eurozone GDP numbers looking okay, save for Italy, which remains ugly.
The President this morning tweeted that there’ll be no trade deal until he meets with Xi later this month. While I didn’t notice any strong reaction in the markets to the tweet, I view it as simply Trump positioning himself to ultimately announce a “great” deal that he himself hammered out in the 11th hour.
While there’s no doubt that the trade issues the U.S. has incited with virtually all of its trading partners is the chief cause of the global growth slowdown we’re witnessing, ironically, it is therefore the reason the Fed has pivoted to its now dovish posture. Thus, as long as a “deal” is struck with China, equity investors may look back a year from now and applaud the whole experience.
Longer-term, if the U.S.’s latest global posturing is a harbinger of things to come, its leadership on the global stage will absolutely wane markedly in the years ahead; which will present all manner of challenges for us with regard to the dollar, U.S. deficits, the debt and equity markets, and, thus, our asset allocation decisions when the time comes.