In a March 25 post on the state of trade negotiations I said:
“This is precisely why the stock market is holdings up quite well in the face of D.C. “chaos”. The market knows full well this is the most business-friendly administration in modern American history and that it will not allow the globe to descend into a economically damaging trade war.”
And in a May 8 post outlining the case for a Democrat loss in November, I said:
“…the stock market is currently positioned to take out its all-time highs between now and early November.”
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The stock market is being pushed (down) by the risk of a trade war, and pulled (up) by the strength of the economy. As I said on May 8, I have a bit of an unfair advantage working in the investment industry, but I can tell you that the weight of the evidence suggests the strength of the economy is winning, despite recent market volatility, and that the market appears positioned to reach new all-time highs prior to the November midterms.
Just this morning the catalyst to the stock market matching my prediction emerged via The New York Times. According to The Times, China is desperate to avert a trade war, since – to no surprise to those who objectively pay attention to events on the ground – China appears to have a bit more to lose than the United States.
“American and Chinese officials made progress on Friday toward an agreement that could help avert a trade war, with China pledging to increase its purchase of American goods by at least $200 billion by 2020, largely by lifting existing barriers that would make it easier for United States firms to sell and operate in China, according to a senior Trump administration official.
“To help narrow the trade deficit the United States runs with China, the Chinese would reduce tariffs and other nontariff barriers that currently hinder the flow of American goods and services into China. Removing tariffs and other structural barriers would essentially allow another $200 billion worth of goods to enter China through 2020, the official said.
“Administration officials described the potential deal as a victory that would result in China making some of the structural changes to its economy that the United States has long sought.”
The negotiations are not entirely one-sided. President Trump needs China’s help dealing with North Korea, so it would behoove him to get a deal done in advance of the June 12 summit with Kim. But because the US does not need to make a deal with North Korea, China can only push on that string so hard.
The stock market is a leading indicator, and if negotiations were about to go off the rails it would be “behaving” differently. Current stock market behavior suggests a deal is likely to be reached.
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If and when a deal is made and the stock market takes off, I now expect the Generic Ballot to go R+. I say “now” because since my May 8 post the Generic Ballot has dropped from D+6 to D+4, an increasingly tenuous margin for Democrats to hold.
Democrats’ Generic Ballot collapse should not come as a surprise given their reliance on “Never Trumpism” as their midterm “strategy”. Just in the last two weeks alone Democrats have backed the Iranian regime, Hamas, and MS-13 out of child-like opposition to President Trump. Honestly, it is just embarrassing at this point.