On Tuesday, stocks were trading at all-time highs thanks to a phase-one positive attitude. It was until a news service headline said that tariffs would not roll back in phase-one until a second phase trade deal. Then stocks recovered some losses. But it waffled because investors look for more details, before Wednesday’s signing of the phase-one agreement. One analyst said that these tariffs had become now a roach motel meaning that it never leaves.
The investors have been waiting long for the details of the “phase one” trade deal. Moreover, it will be signed today. Nevertheless, they might already know most of the features, and there may be little newness.
Optimism around the deal for weeks buoyed the stocks. Yesterday was no different. Nasdaq, S&P 500 and the Dow were all-time highs. But it was before a trade-related headline from a news service hit markets. It sent the indexes into a negative area.
There could be some volatility around the release of the trade deal details, claimed the analysts. But the agreement doesn’t have the power to stop trade abuses, and it is a huge problem. Thus, stocks rattled. On Tuesday afternoon, Bloomberg news service reported that tariffs were not expected to lift until a phase two deal.
Moreover, the report claims that phase two deals most probably won’t come before the November election. But for the strategists, it is not a surprise. The market was looking to sniff out a positive surprise, but it was dealt with a temporary setback.
Concerns on Phase-one Deal
The phase-one deal will most probably stop any further tariffs and roll back 15% tariffs to 7.5% on some Chinese goods.
The Chief Investment Strategist at QMA is Ed Keon. He said that there are always rumors about the buying and selling world. There was a raft of good news on earning and also on China trade. That is why there was an incredible, tremendous rally last year and towards the end of the year. That is also the reason why the year with good shape. Any bit of news can have an impact on the market because stocks are not cheap.
Washington policy analyst at Fundstrat is Tom Block. He said that it is unusual to have so few details on a phase-one deal. He added that everything he knows about the deal which is a standstill agreement with some side things. One of those side things was that the United States dropped that China was a manipulator of the currency.
The phase-one deal can still be finalized, said the Block. The sticking point is over how China’s commitment to buy the United States’ agricultural goods was to be worded. He forecasts to see an agreement on Chinse purchases of energy and agricultural products. There also can be some language protecting the United States intellectual property.
Block said that it is a real cease-fire.
The Chief Investment Officer of Bleakley Advisory Group is Peter Boockvar. He said that there is nothing new in the headlines. With the Dow moving back to positive territory, stock indexes fluctuated, and it is not surprising.
We have to wait and see what changes the signing of the phase-one deal will bring.