Trump Understands What Markets Truly Care About
A softer trade stance leads financial commentary. Plus repo madness and a dollar enigma.
He has a lot on his plate, but markets just want to hear about trade.
Photographer: Saul Loeb/AFP/Getty Images
Some 24 hours after he sent equities tumbling by using a United Nations address to bash China — accusing it of manipulating its currency and stealing intellectual property just days before planned high-level trade talks — President Donald Trump was at it again. Only this time, he made sure to say the words that would ease concern that all hope was lost when it came to striking a trade deal. In fact, Trump said, a deal could happen “sooner than you think.”
The S&P 500 Index promptly erased its losses to surge to its biggest gain in two weeks. But what about talk of impeachment? Investors know that is largely a sideshow better suited for discussion around the office water cooler. Even if the House were to impeach, it’s unlikely the Republican-controlled Senate would vote for removal. The real play, as seen in the move in equities, is betting that the politics in Washington pressure Trump to rapidly de-escalate the trade war by reaching some sort of agreement that he can claim as a victory. A strong stock market would be a powerful weapon for Trump as he attempts to fend off attacks from Democrats, and movement on the trade front would be just the thing to spark animal spirits. The latest monthly survey of global fund managers by Bank of America Merrill Lynch, released last week, showed just how important the trade issue is to markets. It found that the U.S.-China trade war topped the list of investor concerns, with 40% saying it was the biggest risk facing markets. “Markets are way more interested in a trade deal with China,” said Jamie Cox, managing partner for Harris Financial Group. “Now that the Congress is deadlocked into impeachment, the president can close a deal with China to boost the global economy into 2020, just in time for ballots to be cast.”