Trump Sucks All the Optimism Out of Markets

This is not the way olive branches are supposed to work. With signs that the recent frosty relationship between U.S. and China trade negotiators was beginning to thaw, investors expected that President Donald Trump might use his United Nations address to strike a conciliatory tone. Instead, he bashed China, accusing it of manipulating its currency and stealing intellectual property just days before planned high-level trade talks. Markets responded accordingly.

The Standard & Poor’s 500 Index fell the most in a month, while U.S. Treasuries rallied as investors sought haven assets. Stocks only briefly pared some of their losses and bonds barely budged even after Trump sought to quell rising impeachment talk by announcing he’ll release the transcript of a July phone call with Ukrainian President Volodymyr Zelenskiy after allegations he sought foreign help to smear a political rival, demonstrating how much weight markets put on trade talks. The latest monthly survey of global fund managers by Bank of America Merrill Lynch, released a week ago, found that the trade war topped the list of investor concerns, with 40% saying it was the biggest risk facing markets. And the rebound in equities the last few weeks came as U.S. and Chinese trade negotiators appeared to be making progress, paving the way for Chinese Vice Premier Liu to head to Washington next week. “Markets have been a little bit optimistic hoping the trade talks that were being planned for next month would be a step forward,” Chris Zaccarelli, the chief investment officer for Independent Advisor Alliance, told Bloomberg News.