According to White House “sources” close to the U.S.-China trade talks, things are starting to heat up as President Trump pushes for an agreement ahead of 2020.
Sponsored Link: [BREAKING] Weird Formula Finds Most Profitable Stocks & ETFs
It’s all part of his bid to get re-elected, said the Washington insiders to CNBC this morning. By striking a deal with the Chinese, Trump hopes to spur on another stock market rally to gain the approval of undecided voters.
Moreover, these sources claim that Trump has been watching Wall Street closely over the last few weeks, trying to gauge the market’s reaction to the ongoing negotiations. Bloomberg reported earlier today that avoiding a crash has become one of the President’s top priorities as well – a revelation that seems to have investors puzzled, as evidenced by today’s slumping share prices.
With stocks falling over the last two sessions, it seems that the news about Trump’s sensitivity to the market has only made things worse – confirming that China can now use America’s struggling equities as leverage, something that many analysts feared would happen months ago.
Stocks started out on an absolute tear in 2019, fueled partially by investors who were optimistic about a trade war truce sometime before March – the month in which a tariff deadline was looming.
Now that March 1st has come and gone, and the tariff-hike has been pushed back, investors and experts alike are afraid that the gains from a trade deal have already been “baked in” to equities via pre-deal hype. If the two sides do eventually agree to terms, some analysts now believe that it would have little effect on the already pumped-up markets.
The real danger here, though, could be lurking in President Trump’s eagerness to strike a deal. The sticking point in the negotiations thus far has been China’s inability to prevent intellectual property theft, and if they simply stand their ground until 2020, Trump may be forced to concede.
Walking away from the trade war without IP theft prevention measures would be disastrous, and if that did happen, a near cataclysmic event could be awaiting investors on the other side of the truce.
Sponsored Link: DON'T Steal This $14,950 Investing Book...
And with stocks already teetering on the edge of a correction, China could now have Trump on the ropes if he’s really as concerned about the market as the “sources” claim he is. If that’s true, the ball is now squarely in Xi Jinping’s court, and all the Chinese need to do from here is run out the clock.
After all, the Chinese have shown that they could care less about their economy tanking. This is a crucial moment for the ruling Communist Party, and if their markets get flushed down the drain in the process, Xi will happily pull the plug as long as it results in a continued quagmire.
Remember, by and large, Chinese investors don’t really participate in their stock market. Almost all of China’s household wealth is locked up in real estate, an industry that has mushroomed into a gigantic bubble as a result. So long as property values keep rising, the Chinese people – who are also fiercely nationalistic, by the way – won’t cause too much of a ruckus.
Yes, the trade war has absolutely wounded the Far East nation, and eventually, the effects of the tariffs will creep into the housing market there as well.
But it’s going to take time, time that Trump is quickly running out of as 2020 approaches, and with today’s losses, it seems investors are starting to figure that out for themselves.