Sunday, May 20, 2018

US-China Deal To Remove Major Stock Market Risk

Treasury Secretary Steve Mnuchin today said that China Tariffs are "on hold." Trade-deal progress would be bullish clearing one of the biggest stock market risks of the Trump administration. One of the biggest beneficiaries would be the tech sector.

Bullish For Tech Stocks

Mr. Mnuchin said trade negotiation have "specific targets industry by industry."

While agriculture and energy were two specific industries mentioned today China has shown interest in buying more semiconductors from the US.  That was an early sign that a trade deal would directly benefit the tech sector.

Mr. Mnuchin said that a trade deal would include improving "structural issues." Fixing those issues likely include protecting US companies' intellectual property and increasing competitiveness in China.

That would potentially open the doors to a huge market for many qualified US companies without risking patents and intellectual property.

Bullish For The Stock Market

One of the biggest concerns early on about a Trump presidency was trade war risk.  We may be inches away to rectify this core stock market concern.  If this negotiating momentum continues markets have an excuse to retest old highs.

Prelude To North Korean Deal

Negotiations with China and setting up a peace deal with North Korea are occurring simultaneously and probably not by coincidence.

China accounts for 90% of North Korea's trade.

Closing a deal with China could involve China adding pressure on North Korea to settle the current stand-off.

Even though North Korea recently backed out of planned peace negotiations, the US and China's joint pressure did manage to get initial acceptance by North Korea of a meeting.

A strengthened US-China trade deal could again increase pressure on North Korea to return to the table. Any resolution would ease tensions in the region benefiting the economy and encourage further US-China trade momentum.

Conclusion

The stock market may be about to hurdle one of its biggest risks with the progress of US-China trade negotiations. The tech sector would be one of the main beneficiaries which could set up a retest back to the old stock market highs.



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