"It Would Be A Huge Shock To The Market" - What Happens If The Dec. 15 Tariffs Kick In

Now that it appears that the December 15 tariffs are "going forward" despite weeks and weeks of "optimism" that they had been indefinitely postponed, Wall Street is starting to get very unpleasant flashbacks to last December, when the S&P plunged so much, it was the worst December since the Great Depression.

Will Trump risk it all again?

Well, with the S&P starting its descent at 3,150, and with the Fed actively engaged in QE4, he certainly has far more "buffer room" to engage China much more forcefully this time around, and instead of kicking the can again, actually impose the 15% tariffs on $160 billion in Chinese imports on December 15.

(Click on image to enlarge)

And while the US may (or may not) end up victorious in such a showdown, it will give Wall Street strategists - who have all flipped a U-turn and reversed from extremely optimistic to suddenly pessimistic - copious opportunities to impress their clients with superlatives such as this one from Manulife managing director Sue Trinh, who said that "if tariffs scheduled for Dec. 15 are implemented it would be a huge shock to the market consensus," adding that "Trump would be the Grinch that stole Christmas" if the December 15 tariffs go through.

Here are some other impressive, if generally meaningless soundbites, from the same analysts who a week ago were scrambling to describe in the most glowing terms just how wonderful the market's melt-up is:

Tongli Han, chief investment officer at Deepblue Global Investment:

  • "What happened recently makes this trade deal more costly for Chinese leaders -- so I’m seeing a gloomy future for the short term, one-to-two months", Han said in an interview with Bloomberg TV.
  • "It will be definitely risk-off across the screen."

 Steve Brice, chief investment strategist at Standard Chartered private bank:

  • "It’s time for investors to take a little bit of risk off the table, said Brice on Bloomberg TV. “It looks like it’s going to be pushed to the beginning of next year at the best case." The message to investors is “maybe trim a little bit of equity exposure, or certainly not chase the market at this stage. But look to do so in the next few weeks if we see a 5-to-7% pullback.”
  • Longer term, Brice remains optimistic “the U.S. and China will still strike a deal of some sort. That will reduce uncertainty and help the global economy do well.”
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