One thing technicals cannot account for are news events, and Tuesday’s relaxation of fears about #TRADEWARS(tm) drove indexes to a very nice rally that day. That said we’ve stated that fear has been a bit overblown and emotional.
Monday, Trump tweeted “China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property.” Tuesday, Chinese President Xi Jinping made a speech touting plans to give foreign companies greater access to financial and manufacturing sectors. He also talked about a cut in tariffs on car imports and an improvement in protection of intellectual property, among other measures.
“It was a short-term surprise to the risk markets that Xi put out a positive comment saying he’s open to trade negotiations and relaxing trade restrictions. This is going to be an ongoing issue for months, but for today it’s a shot of adrenaline,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors.
All that said, more #TRADEWARS(tm) hand waving could be coming as it was reported late in the week the White House plans to step up pressure on China to make trade concessions, via a plan for fresh tariffs and a threat to block Chinese technology investments in the U.S. Details of which Chinese products are on the hit-list of $100 billion in tariffs could be revealed as soon as next week.
For the week the S&P 500 gained 2% and the NASDAQ 2.8%.Continue reading