Pro Perspectives 10/11/19

October 11, 2019

We've talked about the potential for a cut down trade deal and a "melt-up" in stocks. 

The catalysts have been lining up. 

After forcing global central banks back into an ultra-accommodative stance, with the risk of an indefinite trade war hanging over the heads of central bankers, Trump has positioned himself, to make concessions at anytime (in this case, a "limited deal") and claim victory on the trade war. 

After this week's U.S./China trade meetings, it sounds like that's what we're getting. 

 

Trump has called it a "Phase 1" deal, which includes an agreement on "currency issues," which I suspect will result in weaker dollar, not just against the yuan ,but a broadly weaker dollar.

Most importantly, both parties stood in the oval office and ceremonially shook hands in an Phase 1 agreement (in principle).  The intent was clearly to signal the end of the trade war (for the moment), to clear the overhang of uncertainty on markets, and move any further phases of negotiations to back burner issues for the global economy. 

This probably keeps the Fed on hold this month, in a wait and see, posture.  And I suspect we'll see global sentiment, which has waned over the past year, bounce back.