U.S./China Trade Negotiations Continue to Progress

Apr 12, 2019 | Nick Scholte


And the market appears to be "pricing in" a favourable outcome; should the reverse occur, the downside potential in the markets appears to outweigh the upside. That said, I continue to expect a deal of some type will eventually be reached.

To my clients:

It was a predominantly up week for North American stock markets with the Canadian TSX finishing up 0.5%; the U.S. Dow Jones Index finishing down 0.05% (note the extra 0); and the U.S. S&P 500 finishing up 0.5%.

Exceedingly short update this week with very brief comments on two topics:

- U.S./China trade negotiations continue to progress. Some type of deal is looking more and more certain and the benefits of such are being priced into the stock market. The more open question pertains to the contours of any deal reached, most particularly the speed and degree to which existing tariffs are unwound. Should a trade deal not be reached at all, or should the pace and degree of the tariff unwind be less than hoped, it is likely that the downside potential in the markets outweighs the upside. That said, the odds greatly favor a deal being reached, mostly because both sides are well motivated to do so.

- Next to the yield curve, the next most closely watched of our (that is, RBC’s) recession indicators is the trend in weekly jobless claims. On this front, at 196,000 reported jobless claims, this metric reached yet another new 50-year absolute low. It is also the second time in the past three months that the initially reported figure came in below 200,000 – occurrences I never thought I’d see in my career (as it turns out, the first occurrence in January was subsequently revised up to 200,000). In any event, jobless claims in particular, as well as all other indicators other than the yield curve, continue to suggest ultra-low odds of recession.

That’s it for this week. All the best,


Nick Scholte, CIM, FCSI

Vice-President & Portfolio Manager
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