US-China trade deal: A case of 'buy the rumour, sell the fact' in the making?

Author: Justin Low | Category: News

It looks like we're headed towards some kind of deal in the near future

US China
At least that's what recent headlines are suggesting, despite the fact that we've seen the date for the deal been pushed from April to May and as of last week, suggestions were for a deal to be signed in June instead.

Regardless of those headlines, at this stage, it seems like both sides - or maybe just one - want to get this done really badly and I reckon we will see some semblance of a trade truce come about as we enter 2H 2019.

That said, the bigger question remains that will this be enough to help ease concerns about the global growth slowdown? Ultimately, that will come down to the details.

Just think of this trade deal between US and China as a collaborative effort to assemble a car. It starts off with a lot of great suggestions and big talk about how amazing the end product will be. But as they go through the details, it turns out that piecing together most of the parts just isn't viable as both sides don't see eye to eye on certain issues.

So, by the time they're rushing to get the car to the production line, both sides will just decide to strip off the parts which they can't agree on and fit in whatever there is left. The end product will be a car lacking in quality and probably isn't something revolutionary as hoped for since the integral parts have been left out.

When you look at it that way, the headlines may suggest that a trade deal between the two is a great thing for risk assets and the global economy. However, when pouring over the details, it could make a solid case for market participants to taper down their recent optimism and proceed with a case of 'buying the rumour, selling the fact'.

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