Fears Fading Away As Santa Loads His Sleigh

Unless you've been living in a cave or don't have access to a TV, computer, smartphone, or even a newspaper, you likely know that Presidents Xi Jinping and Donald Trump laid the groundwork for a trade deal Saturday night in Buenos Aires. Generally referred to as a "truce" or cease-fire in the current trade war, the key is that the two sides have agreed to a few things and to keep talking.

As such, no new tariffs will be applied by either side for 90 days. But after that, the details are skimpy at best, and many wonder if a deal involving issues such as forced technology transfers and intellectual property protection can actually get done in such a short period of time.

What we do know is our Negotiator-in-Chief tweeted over the weekend that he and Xi had agreed to what would amount to a "great deal." A deal where China says it will buy a bunch of stuff from the U.S. in order to close the trade gap between the two countries. Importantly, this includes agriculture as well as cars, technology and other industrial products.

We also know that stock markets around the globe like the news - a lot. The bottom line is simple. The second big, near-term fear - the fear that a prolonged trade war would damage the global economy - is now fading. In response, traders appear to be "discounting" the expectations for (1) a trade deal to get done and (2) reduced recession risk in developed markets.

Therefore, within one week, both of the key, near-term fears have been checked off. Recall that last week Jerome Powell eased fears that the Fed would be stubborn and "overshoot" - again hurting the economy in the process. And now we've got significantly reduced fears that China and the U.S. will become stubborn in their trade dispute.

Time For the Year-End Rally?

So, is it time to cue the traditional year-end, aka Santa Claus rally on Wall Street?

From the looks of the futures market, it would appear that Santa has loaded up his sleigh a bit early this year with gifts for stock and commodity market investors. Dow futures are pointing to a gain of over 425 points at the open. Oil is up 5%. Gold, copper, silver, and platinum are all up 1% or more. German's DAX is up 2%. London's FTSE is up 1.6%. France is up 0.8% (this despite the violent protests occurring in Paris). Italy is up 1.8%. Japan rallied 1%. China's Shanghai index rallied 2.57%.

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Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any ...

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