A little investor “angst” settled in Sunday night as the Chinese made it clear that they’d like to have “more talks” prior to signing the interim trade deal. The terms of the interim deal or “phase one” as the President calls it, are still emerging (but I’m sure whatever they are, they’re going to be “Big and Beautiful” LOL). On the surface it looks largely like an agriculture deal and a cease fire on new tariffs. Stocks are off, bonds and gold are both trading higher. This isn’t a “break down” in talks, but the market clearly doesn’t like the hesitation of inking the deal. An interim deal will likely be struck, by year end but the two parties remain very far apart on bigger issues surrounding IP theft, trade deficits, Huawei technology, etc.
Market run down-
Oil: coming off the Friday highs with equities. Following the Iranian tanker attack on Friday, investors appeared to be pricing in a nervous weekend in the ME. Failure for further escalation in the ME, coupled with the Chinese trade “hesitation”, we’re seeing Oil prices trade lower this morning. We will be hitting the “buy” button on Oil as it fits the scope of our outlook asset allocation in terms of the broader economic cycle. We’re expecting a re-acceleration of Inflation into year end, and Energy tends to be a top performer in that environment.
Geopolitical risks remain elevated and bullish near-term,
Cycle risk (inflation accel) remains bullish near-term
Supply/Demand fundamentals remain bearish near to intermediate term.
Gold: yet again another buying on opportunity presented itself on Friday. Gold is punching higher following the Thurs/Friday wipe out in prices back to 1479.
Volatility: remains elevated despite the bounce on equities last week (first up week in the last 4 for stocks). So long as our quantitative signal remains “bullish” trend – you should exercise caution in the equity space.
Bonds: same thing, punching higher (yields falling of the top of our range) on US/China angst.
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