If you are feeling some relief because of the “trade truce” between the US and China, don’t. At least that is what Morgan Stanley and Bank of America are saying. Morgan Stanley explains that the current rally is very reminiscent of what happened last November, just before the market imploded and had the worst December on record. At that time, the US and China had another truce which sent markets rallying. However, bigger tensions loomed larger and set the market up for a historic fall. One of the big issues was that the seeming ”truce” stopped inventory managers from purchasing because there was no more incentive to stockpile.
FINSUM: The most interesting view here is the idea that the markets are trapped between the “Powell Put” and the “Trump Call”. That is the concept that every time markets are doing well, Trump will try to drive a harder bargain with China, and if the market falls, Powell will cut rates. In this way, markets could be trapped in a banded range.