By far, the biggest news of last week was a partial trade deal between the US and China. In broad strokes, the US agreed to delay a tariff hike (an additional 5% tax on $250 Billion of Chinese imports, originally scheduled for October 15th) while China would agree to increase purchases (about $50 billion) of US agricultural goods. Unsurprisingly, investors were greatly cheered by the news and the Dow Jones rallied more than 300 points.
There are a lot of open issues still on the table including a dispute and arbitration mechanism, intellectual property issues, overall trade imbalances, currency manipulation declarations, and so on. So, is this the beginning of the end of the trade war? Perhaps not, but it’s still encouraging news and better than additional escalation. Over the ongoing negotiations which are likely to stretch out over the entirety of 2020, investor attention may start to gravitate towards real-world earnings results and global GDP growth estimates rather than easily summarized headlines.