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Trump-Xi Meeting: The $300 Billion Bet

In my opinion, investors just don’t want to see conditions worsen after the meeting. It’s important that Trump comes away from the meeting looking like a winner because if there is no progress, he is prepared to hit Beijing with tariffs on at least $300 billion in Chinese goods.
James Hyerczyk
U.S.-China Trade Talks

The major U.S. stock indexes settled mixed on Monday. The cash indexes were split, but the futures indexes settled higher. The price action suggests the lack of leadership in the markets with investors seemingly focused on too many events to make a rational investing decision.

Investors were watching for new developments in the Middle East, while looking ahead to a key meeting between U.S. President Trump and Chinese President Xi Jinping at this week’s G20 summit in Osaka, Japan.

In between, traders have to deal with economic reports and a series of Fed speakers who could shed some light on the criteria central bank policymakers will be using to make their next interest rate decision in late July.

In the cash market, the benchmark S&P 500 Index settled at 2945.35, down 5.11 or -0.18%. The blue chip Dow Jones Industrial Average finished at 26727.54, up 8.41 or +0.03% and the tech-based NASDAQ Composite ended at 8005.70, down 26.01 or -0.34%.

US-Iran Tensions Ease Ahead of G20 Summit

On Monday, there was little response in the market to new sanctions imposed by President Trump on Iran. Perhaps it was because there was no response from Iran. Furthermore, with the U.S. offering to negotiate with Iran and the G20 meeting coming up this weekend, Iran doesn’t want to look like an agitator.

Trump essentially chose to “fine” Iran for shooting down U.S. drone last week. He did this after realizing that an attack on Iran would’ve cost civilian lives, which would have been viewed as an excessive response.

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Trump Needs to Look Like a Winner after Xi Meeting

As far as we know, the meeting between Trump and Xi is still on. While it’s a good thing that they are meeting, investors don’t really know what outcome to expect. Monday’s price action suggests investors were unwinding both long and short positions. Expectations for progress toward ending the trade war are low and sources say there has been little preparation for a meeting.

In my opinion, investors just don’t want to see conditions worsen after the meeting. It’s important that Trump comes away from the meeting looking like a winner because if there is no progress, he is prepared to hit Beijing with tariffs on at least $300 billion in Chinese goods.

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