– By Fred Dunlap –
A quick, short commentary here, Friends, as you go into the weekend…(an update from last night’s newsletter on the Trump/Xi meeting)
Well, that didn’t take too long. Two hours after the initial handshake tonight, the news wires report that “Donald Trump and Xi Jinping have agreed to restart trade talks, China says, removing an immediate threat looming over the global economy.”
Whew! Imagine that. They opted for our Scenario 1, which also was the path of least resistance…
Surely, this will send equity markets up sharply in the next month, as we expected it would do.
While the early news reports are limited, we know that trade talks will resume. Also, Trump agreed to hold off on new tariffs and to remove the ban on Huawei. The latter had been a blacklisting of Huawei which prohibited US tech companies from selling their products to the Chinese firm. The removal of the blacklist is good news for Huawei, but also good news for many of the US tech companies, as it will restore a sales volume that had been lost with the ban.
Tonight’s developments are bad news for the Bears, who are positioned/invested in (low-yielding) bonds. This geopolitical news could catalyze a groundswell of economic bullishness, which could easily steepen the yield curve, causing a capital loss for bond-holders as well.
For the Bulls who remained invested in equities, get ready for a very notable tailwind over the next 4-8 weeks.
As for me… I guess I will need to retire the PING PONG nickname… Damn, that one kinda resonated…for a moment.
Stay thirsty my friends.
Freddie Deeeeeeeeeee