Features

Trade-war ceasefire boosts stockmarkets

Stockmarkets sighed with relief after the G20 summit in Japan brought a handshake between Donald Trump and Xi Jinping.

Xi Jinping shakes hands with Donald Trump © BRENDAN SMIALOWSKI/AFP/Getty Images

Read my lips: no new tariffs

"The great US-China trade war is all over," says Howard Gold on MarketWatch. The G20 summit in Japan brought a handshake between Donald Trump and Xi Jinping, with the former offering to shelve new threatened tariffs on Chinese imports and to lift some restrictions on tech giant Huawei. With the 2020 election looming, the president has shown that he "won't go to the wall" to win a fundamental change of American trade relations with Beijing.

Equity markets sighed with relief, with America's S&P 500 rising to a new record high just below 3,000 early this week. The index soared by more than 17% during the first six months of this year, its best first half since 1997.

Yet the road to a deal remains far from clear, say Alan Rappeport and Keith Bradsher for The New York Times. Top Trump advisers stress that there is "no timeline" to reach an agreement, and that the two sides remain "as far apart as they were when talks broke up in May". News that the US is considering imposing $4bn in extra tariffs on the EU amid a row about aircraft subsidies also suggests that a new era of trade harmony has not broken out between world leaders. In the meantime, "existing tariffs remain in place, meaning that the current drag on earnings and growth will continue", as Alec Young of Global markets research told CNN.

All shall have prizes

Riding the asset-price bubble

There is no doubt that the "historic policy pivot" by major central banks towards monetary easing has driven this curious rally. The continuous liquidity injections risk decoupling asset prices "too far and too fast" from the economic fundamentals. That sets the stage for a "painful market correction".

The fundamentals are not looking great, agrees Jeff Cox on CNBC. The drag of trade tariffs has left analysts forecasting falls in S&P 500 corporate earnings for the second and third quarter. Yet investors have become so dependent on the Federal Reserve to deliver rate cuts that they "seem to care more about a dovish Fed" than the bad news that is making it dovish in the first place, says Spencer Jakab for The Wall Street Journal.

The chances are high that we have now entered the last innings of "this long bull market", says Tom Stevenson in The Daily Telegraph. The quandary is that past evidence shows that "the final push can give investors their best gains". Nevertheless, investors would be wise to consider switching into more high-quality and defensive stocks and as MoneyWeek explored last week look at topping up their gold holdings.

Recommended

Stockmarkets shrug off turbulence
Stockmarkets

Stockmarkets shrug off turbulence

Stockmarkets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains.
4 Feb 2021
The charts that matter: the dollar extends its fall
Global Economy

The charts that matter: the dollar extends its fall

The US dollar took quite the tumble this week. Here’s how the charts that matter most to the global economy reacted.
17 Apr 2021
The MoneyWeek Podcast: how to not lose money to inflation and financial repression
Investment strategy

The MoneyWeek Podcast: how to not lose money to inflation and financial repression

Merryn talks to Peter Spiller of the Capital Gearing Trust about how he navigated the last extraordinary year; what he's buying now; and how he plans …
16 Apr 2021
UK mid-cap stocks look forward to life after lockdown
UK stockmarkets

UK mid-cap stocks look forward to life after lockdown

The FTSE 250 hit an all-time high at the end of last week, as investors look to a post-lockdown recovery.
16 Apr 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
What does the Coinbase listing mean for bitcoin and other cryptocurrencies?
Bitcoin

What does the Coinbase listing mean for bitcoin and other cryptocurrencies?

As the bitcoin price hit new highs, the world's biggest cryptocurrency exchange, Coinbase, listed on the stockmarket. John Stepek looks at what that m…
15 Apr 2021
Properties for sale for around £400,000
Houses for sale

Properties for sale for around £400,000

From a converted church in Banffshire with views towards the Cairngorms National Park, to a period property in the Georgian market town of Beverley, e…
2 Apr 2021