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We have to grudgingly give the U.S. President credit on his ability to keep sending stocks upward on continued tweets and other public releases from himself and his ‘minions’ (U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steve Mnuchin and WG economic advisor Larry Kudlow in particular) about ‘how close’ they are to a ‘Phase One’ deal on trade with China. They even have the Chinese government reps on board with playing the same media game by doing releases such as China’s Ministry of Commerce online statement this week that “both sides discussed resolving core issues of common concern, reaching consensus on how to resolve related problems (and) agreed to stay in contact over remaining issues for a phase one agreement.” Stock investors continue to buy into this optimism which has sent U.S. stocks to record highs in November despite negative earnings growth and weakening global economic conditions, most of which were caused by the same President’s tariffs and the ensuing trade friction. If ever we saw a situation that could end up being a ‘buy on rumour’ (repeated many times over) and ‘sell on news’, this has to be it. Even more so since we really don’t expect that a “Phase One” deal, if it occurs, to have any ‘meat on the bone’ in terms of addressing the bigger bilateral trade issues between the U.S. and China such as intellectual rights and foreign business ownership. It probably just means more soy beans being sold out of the U.S. farm belt to China. But stock investors are in a good mood and seem willing to take whatever is offered.
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