The Tell: The trouble with markets now is there will be no trade talks to hang sentiment on

So what are markets going to trade on now that the U.S. and China have reached a trade pact?

That’s not just a flip comment. Oliver Jones, senior markets economist at Capital Economics, examined the correlation between sentiment on international trade tensions and stock market performance.

To do so, he made a simple chart of Google searches and Bloomberg News stories comparing those containing “trade deal” with those containing “trade war.”

The results showed some, if not an air-tight, connection to markets.

“The lack of a further boost [from U.S.-China trade relations] should also contribute to cyclical sectors outperforming their defensive peers by a bit less in 2020. Meanwhile, the analysis above suggests that the impact will probably be felt most in China’s equity market,” he told clients.

On Thursday, the S&P 500

SPX, +0.49%

  and the Dow Jones Industrial Average

DJIA, +0.56%

 each rose about 0.5%, while the Shanghai Composite

SHCOMP, -0.52%

 lost 0.5%.

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