Despite a calm market on Friday, as the rally stalled on a somewhat weaker Payrolls release, the Dow Jones and S&P 500 closed higher for the second consecutive week. On Friday the Dow Jones Industrial Average closed up 0.3% to close at 26,797.46. For the week, the Dow and S&P 500 both gained 1.5% with the Nasdaq closing higher by 1.8%. This came on the back of the world`s two largest economies are making progress on substantive talks that are now scheduled for October.
However, we must recognize the danger in markets becoming too focused on “hope” of a trade deal between the US and China with a pattern emerging of both countries playing politics and likely having no intention of a trade deal – many market participants are suggesting that China will hold out until the 2020 election in a bid to help dislodge Trump from the White House, then focusing on a more cooperative Democrat Party President to help them through the future of US-China trade.
We believe that the US-China trade talks drag on and in the future, a more watered down deal takes place with the risk being a future “cold war” that will look a lot like the US-Soviet Cold War of the 1970s.