The Week Ahead: U.S.-China Trade, Economic Data, Earnings

Chart of the S&P 500 (SPX) and Shanghai Composite (SSEC)

Chart of the S&P 500 (SPX) and Shanghai Composite (SSEC) – Source: and TradingView

The past week in the markets saw all three major large-cap U.S. indexes (Dow, S&P 500, and Nasdaq Composite) rise consecutively for all eight weeks since the beginning of the year. It’s actually nine weeks if you include the last week of December. For the indexes to be positive for the first eight weeks of any year is an extremely rare occurrence.

Even the small-cap Russell 2000 index achieved the same feat. As did the Shanghai Composite (the major Chinese index comprising all stocks traded on the Shanghai Stock Exchange). One of the key forces driving up these markets has been increasing optimism over the prospects of U.S.-China trade negotiations between Chinese President Xi Jinping and U.S. President Donald Trump.

Trump-Xi Meeting Planned for Late March

It was reported on Friday and confirmed by Trump that the two Presidents have planned to meet at Trump’s Mar-a-Lago club in Florida in late March. This has given investors yet another boost of confidence that both sides should be willing and flexible enough to do what it takes to get a mutually beneficial deal completed. Even if it takes longer than initially anticipated. The 90-day trade-war ceasefire between the two countries, which is supposed to end on March 1, will apparently need to be extended.

The trade talks between the U.S. and China are of utmost importance for the worldwide economy and the financial markets. This is not only due to the pivotal nature of bilateral relations between the two remaining superpowers. It’s also because any U.S.-China trade agreement has far-ranging implications for global economic growth.

U.S.-China Trade Talks Boost U.S./China Markets

The chart above features a comparison of the one-year performance of U.S. and China equity markets. Clearly, both the S&P 500 (SPX) and Shanghai Composite (SSEC) have risen sharply since the beginning of the year. Part of this dual boost has been due to optimism that both countries will likely move towards a successful trade agreement.

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Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose ...

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