One asset manager called last year’s fourth quarter stock rout perfectly, and they are doubling down, saying it will happen again this year. Principal Global Investors’ Seema Shah says that stocks are facing another imminent selloff if the US and China can’t get a trade deal done before the December 15th tariff deadline. “If that trade deal doesn’t happen and if everything falls apart and it feels like tensions are getting worse, then I think we are facing a potential repeat of last year, and it will be worse”, said Shah. She says that the shock could be even bigger than in other parts of the year because of how liquidity disappears in December.
FINSUM: So we are dubious on this call, but what is interesting to us is that this argument was published on November 28th, and since then Trump has backtracked on the trade deal timeline.
It might seem a bit of an over-exaggeration at this moment, but it is not too far-fetched. Hong Kong is continuing to devolve into ever more violent and disruptive protesting, and the pictures and developments seem to indicate that the situation might be devolving into a kind of disorganized civil war. Protesters have taken siege of the university in the city and the City’s security forces attempted unsuccessfully to forcefully take it back this morning.
FINSUM: What is the mainland going to do here? Things are getting worse and worse.
Hedge fund icon Ray Dalio delivered a grim speech yesterday at a gala dinner for the National Committee on US-China Relations. The investor is worried about war in all it forms. He said that “There is a trade war, there is a technology war, there is a geopolitical war, and there could be a capital war”. Famed former US Secretary of State Henry Kissinger also spoke at the event and told both sides that they must avoid a shooting war at all costs, as no side can win.
FINSUM: Everyone on both sides will hopefully be somewhat relieved if a “phase one” trade deal can be reached.
Trump went on the record yesterday telling investors that the US and China were close to finalizing a trade deal. Markets were unconvinced. Speaking at the Economic Club of New York yesterday, Trump said “We’re close to a significant phase-one trade deal with China … It could happen soon, but we will only accept a deal if it’s good for the U.S. and our workers and our companies”. Markets held ground after the comments, but ultimately fell back as Trump offered little evidence to back up the comments of a deal being “close”.
FINSUM: In our view of this situation, a deal is never close to being done, it is perpetually on the edge of falling apart and only truly done when it is signed.
Hong Kong police have warned that the city is on the brink of collapse. A police shooting of a protester on Monday has sparked a huge wave of renewed protests that have blocked roadways and caused chaos. “Over the past two days, our society has been pushed to the brink of a total breakdown as rioters went on a rampage”. The protests have turned increasingly violent in recent days as 128 were hospitalized with injuries on Monday.
FINSUM: This has no end in sight, and with tension increasing, so too are the odds that it somehow becomes wrapped up in the US-China trade war.