A Counterintuitive Reponse To A U.S.-China Trade Deal?

Midnight on March 1 was President Trump’s drop-dead date for a trade deal with China, but now that hard-and-fast spot on the calendar has become mushy.

The president tweeted Sunday night that “substantial progress” has been made in talks with China. He’s delaying the proposed increase in tariffs — on $200 billion worth of goods from 10% to 25% — that were scheduled for this Friday.

It looks like the market hysteria and death of certain industries in both countries won’t be happening, at least for now. Markets zoomed higher on Monday morning in China and the U.S. after the promising news.

The sunny headlines are great, but brace yourself for the darker reality that is sure to come our way.

Brace yourself…

When – not if, but when – the trade deal with China is done, expect the markets to breathe a sigh of relief. International companies will shoot higher, and drag everything else along with them.

But this won’t mark a sign to buy. Counterintuitively, it will be the time to sell, at least for the short term.

Lifting the trade tariffs with China will boost demand for many U.S. goods and ease the pricing of many Chinese items. That’s great, and certain companies, like Apple (Nasdaq: AAPL), Ford (NYSE: F), and Caterpillar (NYSE: CAT), will breathe a collective sigh of relief.

But that won’t cure what ails the U.S. markets, which will be the focus after this deal is on the books.

The next focus will be on…

Retail sales for December fell the most in 10 years, while Corporate America posted another great quarter… but painted an ugly picture of the future.

Seven million Americans are 90 days or more behind on their car payments. And we’re getting smaller tax refunds because more of our tax reform boost was included in our paychecks.

Unemployment remains low at 4%, but wages aren’t rocketing higher.

And then there’s GDP growth. After shooting above 4% in mid-2018 based on tax reform, the Atlanta Fed now estimates fourth-quarter GDP expanded by a measly 1.5%. Ugh.

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