Deal Reached On USMCA To Usher In Wave Of New Prosperity
Stocks closed modestly lower on Tuesday, but remain near all-time highs.
Traders cheered reports that the U.S. and China were close to an agreement to delay the new tariffs that are scheduled to kick in on December 15th. But until President Trump says yes or no, it's still just speculation. Nonetheless, it appeared things were "heading in a good direction."
The market also got good news on the USMCA trade deal. After an agreement was reached on Monday regarding new enforcement provisions, it was announced yesterday that the House would bring it to the floor for a vote by year's end where it's expected to pass with overwhelming bipartisan support.
Granted, the Senate won't take it up until next year. But the biggest hurdle was the House. And now with that, essentially, out of the way, it's expected to sail through the Senate when it comes to a vote.
There's been plenty of focus on the U.S.-China trade deal, and rightly so. They are, after all, our third largest trading partner. And the escalating tariffs and punitive measures from both sides created another layer of importance and urgency, not just for the primary players, but for the rest of the world to a degree.
But the USMCA trade deal is even bigger given that Canada and Mexico are our two largest trading partners. In fact, the U.S. exports more than 5 times as much to Canada and Mexico than to China. And the USMCA deal is being heralded as the largest trade agreement in the world.
This deal is estimated to create hundreds of thousands of new jobs, and usher in a wave of new prosperity for the U.S. (which is already doing great), as well as Canada and Mexico.
In other news, we'll get the FOMC Meeting Announcement this afternoon (2:00 PM ET), where the Fed is expected to keep rates unchanged. While some would love to see another interest rate cut, the Fed pretty much told everybody last time (in October) that rates were likely on hold for a while. But while that means no cut, that also means no increase either. And quite frankly, that's just fine.
The U.S. is in a sweet spot right now; a strong economy (although GDP could be higher, and likely will be with these new trade agreements), 50-year low unemployment, near record-high consumer sentiment, surging corporate profits, and household income at the highest level in 20 years – all with low inflation.
I've said it before and I'll say it again, this is an historic time for our economy and the market.
So make sure you're taking full advantage of it.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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