INSUBCONTINENT EXCLUSIVE:
The stock market looks set to end 2019 the way it began the year — highly sensitive to headlines from President Donald Trump’s global
trade war.
Stocks pulled back from record highs to start December, undermined by comments from Trump and others in his administration
suggesting any deal to resolve the trade dispute between the United States and China would not come soon
But the market rebounded at the end of the week on Friday’s strong US jobs and a change in tone from Trump.
Wall Street could see more
15, when the next tranche of US tariffs on Chinese imports is set to take effect.
At the start of the week, investors said equity prices
were factoring in that those tariffs would be delayed if not canceled as Beijing and Washington work on a “phase one” trade deal
But subsequent tough talk from Trump officials has shaken those expectations somewhat.
“Until we get some finality on this, the day-to-day
is going to move on headlines that suggest progress or lack thereof,” said Keith Lerner, chief market strategist at SunTrust Advisory
Services in Atlanta.
While the dispute between the world’s two largest economies commands the spotlight, other trade issues also have
They include a recent delay in ratification of the North American Trade pact, potential US tariffs on imported autos and Trump’s issuing
surprise levies on steel imports from Brazil and Argentina.
Optimism over a US-China truce has helped push the major Wall Street indexes to
all-times highs recently, with the benchmark S-P 500 logging a gain of more than 20 per cent so far in 2019
But as the latest swings show, lack of a resolution to a trade dispute that has lasted nearly two years continues to weigh on the
market.
“The problem is the uncertainty that the trade war process has on business decisions,” said Art Hogan, chief market strategist
at National Securities in New York
“Without some sort of short-term truce, company spending gets frozen and that’s where it affects the economy and the market.”
Aside
from the fallout from the tariffs themselves, “the next read from them going into effect is that trade discussions are not going well,”
said Walter Todd, chief investment officer with Greenwood Capital in South Carolina.
Political tensions over US support for protesters in
Hong Kong and over Beijing’s treatment of its Uighur Muslim minority have also raised concerns about the prospects for an initial trade
deal.
“Without a phase one plan on getting something signed early in the new year, I think the market is susceptible for a pullback,”
said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC.
The focus will remain on trade into next week, even as the Federal
Reserve holds its last meeting of 2019, with the US central bank expected to keep interest rates steady after three cuts earlier in the
year.
“The Fed chairman pretty much outlined that the bar is very high to raise rates,” SunTrust’s Lerner said.
However, he added, if
some of the tariffs result in a sharp slowdown, “the Fed would have to act eventually” by cutting rates.
Investors will also be looking
for signs of strength in the holiday shopping season, given that consumer spending is seen as a key pillar holding up overall economic
growth.
There is a strong incentive to push off the tariffs “as long as people are at the negotiating table,” said Carol Schleif, deputy
chief investment officer at Abbot Downing in Minneapolis.
“President Trump definitely doesn’t want a downbeat consumer going into the
election cycle,” she said.