What a week of good news it has been.
Hong Kong protestors got a small “win” yesterday, and today, reports out of Washington confirmed that China and the U.S. are scheduled to meet in early October with the intent on ending the trade war once and for all.
The market surged this morning as a result, emboldening newfound trade war optimism among investors.
But haven’t we heard this kind of talk before?
Don’t forget, the last few times trade officials met, equities initially erupted as well.
Only to get crunched a few weeks later after negotiations fell apart and additional tariffs were announced.
However, according to a Chinese insider, this time might be different.
“There’s more possibility of a breakthrough between the two sides,” tweeted Hu Xijin, editor-in-chief of the People’s Daily, a tabloid that operates under the Communist Party of China’s official newspaper.
But even though he’s part of a state-ran organization, Hu doesn’t appear to be just a pro-China shill trying to stir the pot.
Since the trade war broke out, he’s been highly accurate with his predictions via Twitter. Recently he warned investors about China’s planned retaliation against the U.S. hours before the Chinese officially announced it, confirming to plenty of Wall Street analysts that he’s got the inside track on new trade war developments.
Other reliable Chinese sources released statements today that shared Hu’s sentiment, like Taoran Notes, a blog run by the Economic Daily.
Which, as you may have guessed, is another state-owned newspaper.
In a 1,200-word essay, the blog said that it’s “very likely” there will be “new developments” in the October meeting.
And though that’s all very exciting, investors need to be very careful about buying today’s news.
Yes, it could lead to the end of the trade war.
And yes, today’s headlines could cause the market to launch a September recovery.
But we shouldn’t be making investment decisions based on comments made by “reliable” tipsters in China. Especially ones that have leadership roles in state-owned media outlets, like Hu does.
It’s true that he’s been predicting trade war developments with alarming accuracy, but we still need to consider how he’s been getting that information.
Is it from a Chinese Communist Party insider?
Or is he simply being fed that information in order to build credibility with Western investors?
China’s wounds are starting to show. Wouldn’t it be highly convenient to drive the trade war narrative through a trusted mouthpiece?
After all, China doesn’t have a great track record of protecting citizens. Especially those that speak publicly about the government without their permission.
Imagine what they’d do to a trade war leaker that’s repeatedly shown China’s “hand”.
To me, the whole thing seems like more posturing from the Far East. China says they’re ready to make a deal, only to blame the U.S. for a negotiation breakdown weeks later.
This morning, Hu told the market precisely what it wanted to hear; that the trade war is finally ending.
But isn’t that exactly what China needs the world to believe right now? Cash will come pouring in if investors think that they can snap-up undervalued assets before the trade war is truly done, providing a nice economic boost for the beleaguered nation.
So, until investors hear it directly from the horse’s mouth, statements from “puppets” like Hu could simply be more noise.
Which, if proven false, would lead to another wicked correction once the veil is lifted on the October meeting.
Even if the U.S. economy continues to show signs of strength.
Because if there’s one thing we’ve learned over the last few years, it’s that investors simply can’t avoid buying or selling a juicy trade war headline.