Stocks Modestly Lower, Waiting For News On Trade
Stocks closed modestly lower yesterday on trade concerns.
Much of this is old news from earlier in the week when it was reported that China is reluctant to commit to a specific amount of ag purchases, and the U.S. is reluctant to remove all tariffs ahead of the formal agreement on the phase 1 trade deal.
Of course, a simple delay is different than no deal. In fact, the signing of phase 1 is already delayed as it was expected to be completed on November 17th when President Trump and President Xi were to meet at the Asia-Pacific Economic Cooperation Summit, before Chile backed out of hosting the event due to civil unrest in their country.
And while nobody is saying the deal is off, President Trump has made it clear that if they can't come to an agreement, he'll raise tariffs on China even more.
But spokespeople from both countries have praised the ongoing negotiations as "constructive" and that "progress is being made" on the text of the agreement.
So work continues on trying to finalize this deal. But you can be sure that everybody will breathe a big sigh of relief once a signing date is announced. And even more so once it's actually finally signed.
Although, I should note that things did get a bit more complicated after China expressed irritation that Congress unanimously passed the 'Hong Kong Human Rights and Democracy Act', which would require an annual review of Hong Kong to determine if China is interfering in their governance, and sanction officials who commit human rights violations. The bill will be sent to the White House where the President will either sign it or veto it.
China has threatened to retaliate if it becomes law. But as of yet, they have not identified any specific actions they would take.
Obviously, the big worry is if it will negatively impact the ongoing trade negotiations.
But it's widely believed that both countries want and need this phase 1 deal. I would not be a bit surprised if it hampers phase 2 and beyond. But optimism remains high that phase 1 is still on track.
In the meantime, our economy is strong with 50-year low unemployment, near record high consumer confidence, low interest rates, impressive corporate profits, housing permits at a 12-year high, and household income at the highest level in 20 years.
I've said it before, and I'll say it again, these are historic times for the economy, and historic times for the market.
So make sure you're taking full advantage of it.
If you're not beating the market this year, or wish you were beating it by more, be sure you read our latest commentary...
A Tale Of Two Investors, Which One Are You?
Best,
Kevin Matras
Executive Vice President, Zacks Investment Research
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