(MarketWatch) “The greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country,” as President Trump described it, triggered a broad rally Friday. But the buying momentum has faded with the Dow Jones Industrial Average and S&P 500 kicking off trading this week on a weaker note, with buyers wary amid a report China wants more talks.
Indeed, our call of the day, suggests last week’s push higher move may have been overdone, considering the lack of meat to the announcement.
Morgan Stanley says those who are banking on this trade deal wrapping up are getting ahead of themselves and that the deal with China is an “uncertain” arrangement at best, according to a note from the bank’s strategists Michael Zezas and Meredith Pickett.
“There is not yet a viable path to existing tariffs declining, and tariff escalation remains a meaningful risk,” they wrote in the note to clients. “Thus, we do not yet expect a meaningful rebound in corporate behavior that would drive global growth expectations higher.”
Nevertheless, investors seem to be focusing on the silver lining. Trump said Washington will suspend a tariff hike planned this week on $250 billion of Chinese goods, in return for China agreeing to buy as much as $50 billion of American farm goods. Future hikes remain in place, though.
For real progress to be made, Morgan Stanley says it will need to see more progress on issues like enforcement and intellectual-property protections.
“Until such evidence is available, we must conclude that this pause is more ‘uncertain’ than ‘durable,’” the strategists wrote.
