Your Wednesday Market Blip 12/11/19

Your Wednesday Market Blip 12/11/19

Stocks continue to trade flat as several major global events unfold. The Federal Reserve today kept interest rates steady, polls open in Britain tomorrow and Sunday is the deadline for a deal with China. The Dow closed up 29 points at 27,911. Trading volume was lower on the day.

The USMCA or “NAFTA 2.0” as some gurus call it, should be voted on by the House next week and the Senate shortly thereafter. Some gurus, like economist Chris Low at FHN think the USMCA is more important to the US economy than the China trade deal. Chris says “The reason we are more excited about the USMCA deal than the Phase 1 China deal is many companies moving production out of China are interested in coming back to North America, but few want to commit to a factory in Mexico only to be hit by a tariff next year. Regardless of the terms, just knowing there’s an agreement that locks in the trade relationship between the three countries will eliminate a considerable amount of the trade-dispute generated anxiety that has frozen corporate decision making. The WSJ enumerates some of the wins for US companies, including a higher percentage of US-made parts in cars and bigger agricultural exports. The peace of mind from a known set of trade rules is harder to enumerate.”

Pressure continues to mount on China. While the USMCA is a big step in the right direction some in the US are now calling on President Trump to not sign the phase one deal with China and just keep the tariffs on since the US economy is doing well and China is not. The main argument is that China will not live up to its promises so why even make a deal in the first place. US trade reps are in China as we speak and market gurus like Jim “Mad Money” Cramer now openly advocate that Trump walk away. Other big investors are predicting a negative economic “event” in the Chinese economy and are actively shorting the Hong Kong dollar as a way to profit from it.