Investors once again showed concern about the US-China trade\nwar. However, Wall Street does not seem to be totally frightened.<\/p>\n\n\n\n
Even after the recent drop, the S&P 500 is only 6% away\nfrom its all-time high. One of the key factors that contributed to this is that\ninvestors know that President Donald Trump is focusing heavily on volatility in\nthe stock market. There is a widespread belief that Trump will not let anything\nreally bad happen to stocks before the next presidential election.<\/p>\n\n\n\n
Wall Street is betting that if the market falls\nsufficiently, the White House will find a way to achieve trade peace with China\nrather than risk losing the 2020 elections.<\/p>\n\n\n\n
” If the pain gets too great in the economy and stock\nmarket, he will have to find a face-saving solution,” said the president\nand co-founder of the JMP Group, a San Francisco-based investment bank.<\/p>\n\n\n\n
It’s a new role in the Fed’s position, the term for a\ntrading strategy based on the belief that the Fed will save the markets and the\neconomy by cutting interest rates.<\/p>\n\n\n\n
Trump checks the financial markets “every few\nhours,” according to Stephen Moore, a Trump campaign adviser.<\/p>\n\n\n\n
“He understands that if the stock market and economy\ncrash on him, there’s no way he can get re-elected,\u201d Moore said earlier this\nmonth at the SALT conference in Las Vegas.<\/p>\n\n\n\n
The financial markets have fallen in recent weeks amid fears\nof a trade war between the world’s two largest economies. Tense investors\npoured money into bonds. This led to a 10-year Treasury yield drop to its\nlowest level since late 2017.<\/p>\n\n\n\n
Trump has threatened to impose tariffs on all remaining US\nimports from China. Chinese state media have put forward the possibility of\nharsh retaliation, including curbing imports of rare metals or even dumping\nBeijing’s huge holdings of US Treasuries.<\/p>\n\n\n\n
Investors hope Trump and Chinese President Xi Jinping will\nmake progress in trade negotiations at the G20 summit next month.<\/p>\n\n\n\n
The total collapse of US-Chinese talks could cause US stocks\nto fall by between 10% and 15% from current levels. This will not bode well for\nTrump and the chances of his re-election and this will pressure him to complete\nthe deal.<\/p>\n\n\n\n
In the face of economic and market turmoil, Trump and\nChinese President Xi reached a temporary trade truce in late 2018 in Argentina.<\/p>\n\n\n\n
However, analysts cautioned against assuming that Washington\nand Beijing would automatically reach a face-saving deal this time. It is\nusually the market and economy that drive political results rather than the\npolicy driving results.<\/p>\n\n\n\n
One of the dangers is that Trump decides that fighting with\nChina is politically popular enough to cover the economic fallout. Another\npotential problem is that Trump may choose a deal – only to be rejected by\nBeijing.<\/p>\n\n\n\n
In other words, Trump may not be able to flip a key to make\nthe trade war disappear.<\/p>\n","protected":false},"excerpt":{"rendered":"
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