The Trade War: A Year Later

It’s been a year since Trump tweeted those fateful words: “…trade wars are good, and easy to win.”The S&P 500 closed at 2691 that day.  While stocks have rallied marginally (0.3%) since then, not everything has gone according to plan.  In fact, just this morning we learned that our trade deficit has reached levels not seen since 2008.  It has grown by $119 billion since self-proclaimed Tariff Man took office.

Bloomberg reports that the Trump administration is pinning its hopes for the market on an announcement of an agreement with China — leading some to fear that whatever deal is struck will be one of political convenience rather than one that leads to real progress.

Trump’s economic team has told him an agreement will unleash a market rally, the people said. Advocates of a compromise with China have also told Trump it is crucial to cut a deal soon to reap the full boost ahead of the election because benefits such as more Chinese purchases of U.S. soybeans and other products will have a delayed impact and take time to reverberate through the economy, they said.

Stocks seem content to wait around, with the 10-DMA serving as a touchstone for the daily gyrations.  But, at some point, even algos can grow impatient.

Today could be that day, as COMP’s 20-DMA is due to reach its 200-DMA — clearing the way for long-overdue backtests for multiple indices.The bigger question, of course, is whether those backtests will hold.

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