Let's assume that China intends to invade Taiwan. Now I have no idea of that's the case, though I could see why now would be a good time to do it.
In any case, that would be a monumental organization, requiring the coordination of hundreds of thousands of people -- probably millions. It's not some kind of switch you can throw. It would have to be planned like D-Day, which took 13 months to plan.
Why would Pelosi's visit change the timeline of any of that?
1) You've already planned it
In this case, what difference does the visit make? You've already made the decision, so you wait for everything to be in place. In the meantime, you use it for propaganda.
2) You haven't planned it
Ok, say this is some kind of grave insult. Well, you're not going to launch an invasion on a whim, so the timeline is still long.
BMO in a note yesterday underscored the timing issue:
Pelosi’s visit carries with it the presumption of a limited timeframe for a tradable response; an assumption that we’ll characterize as misplaced. Any response could be weeks away or further and for this reason we anticipate that the geopolitical backdrop will once again contribute to the bullish underpinnings for the US rates market. There is at least one caveat worth mentioning in this context; it’s not a foregone conclusion that an escalation of tensions between Washington and Beijing would be exclusively a risk-off event. We’ll be the first to concede that had we known Putin would invade Ukraine, there is no way we would have traded it correctly. Our assumption would have been a more dramatic risk-off that overshadowed any inflationary impulse. This is, in part, what has us concerned that any response to Pelosi’s visit ultimately translates into further decoupling in trade between the US and China. Combined with ongoing and escalating supply chain concerns, this would trigger another round of inflationary jitters.
So what's the trade today?
In about 30 minutes, Pelosi's plane is going to land and I feel like there are some people expecting bombs to start flying immediately. Whan that doesn't happen there will be some kind of relief trade. For today, it's as simple as that.
Could there be some 'retaliation'? The SCMP is out with a report saying China could send some war planes across the invisible median line that divides China and Taiwan. Ok, great but no one is going to sell anything on that headline.
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