Brace Yourself for the U.S.-China Trade Deal, It's Going to Hurt
Rodney Johnson | February 26, 2019 | Midnight on March 1 was President Trump's drop-dead date for a trade deal with China, but now that hard-and-fast spot on the calendar has become mushy. The president tweeted Sunday night that "substantial progress" has been made in talks with China, and he was delaying the proposed increase in tariffs — on $200 billion worth of goods from 10% to 25% — that were scheduled for this Friday. It looks like the market hysteria and death of certain industries in both countries won't be happening, at least for now. Markets zoomed higher on Monday morning in China and the U.S. after the promising news. The sunny headlines are great, but brace yourself for the darker reality that is sure to come our way. When – not if, but when – the trade deal with China is done, expect the markets to breathe a sigh of relief, sending international companies shooting higher, and dragging everything else along with it. But this won't mark a sign to buy. Counterintuitively, it will be the time to sell, at least for the short term. **REBROADCAST @ 7 P.M. EST**  During a rebroadcast of the special event, best-selling author John Del Vecchio will reveal his remarkable new system for finding huge profit opportunities in small cap stocks flying under the radar. Extensive backtests show it could have turned a $10K investment into $523,200… over the last 15 years!
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Lifting the trade tariffs with China will boost demand for many U.S. goods and ease the pricing of many Chinese items. That's great, and certain companies, like Apple (Nasdaq: AAPL), Ford (NYSE: F), and Caterpillar (NYSE: CAT), will breathe a collective sigh of relief. But that won't cure what ails the U.S. markets, which will be the focus after this deal is on the books. Retail sales for December fell the most in 10 years, while Corporate America posted another great quarter… but painted an ugly picture of the future. Seven million Americans are 90 days or more behind on their car payments, and we're getting smaller tax refunds because more of our tax reform boost was included in our paychecks. Unemployment remains low at 4%, but wages aren't rocketing higher. And then there's GDP growth. After shooting above 4% in mid-2018 based on tax reform, the Atlanta Fed now estimates fourth-quarter GDP expanded by a measly 1.5%. Ugh. The Fed recently announced it will hold off on automatically raising rates this year, and could also end its balance sheet reduction program. Those announcements sent the markets higher, but that doesn't make a lot of sense. The Fed was raising rates and normalizing its balance sheet because the economy was strong. The central bank isn't taking a break because the economy is growing so nicely, it's because things have slowed down. When we look overseas, the issues get worse. European GDP is expected to grow by just over 1% this year, and China has slowed down significantly, although no one can be sure of their numbers. Germany barely escaped recession when its fourth-quarter GDP came in flat, and Japan is, well, still Japan. They print money like it's toilet paper and pretend it's valuable while their central bank gobbles up equity ETFs and anything else it can find. With so many issues staring us in the face, expect traders to use any positive announcements surrounding a U.S.-China trade deal as a signal to step aside for a while. The good news is, if that happens it should give investors a chance to pick up solid stocks at lower prices before the next leg up. Following Harry's Dark Window forecast, we should see the markets eventually move higher this year before we get a strong selloff. I don't think the fundamental story of low growth and trouble overseas will change, but investors can be fickle. A move back down to recent support levels on the major indices should be enough to draw investor support. For investors with new money to invest, it could pay off to wait until the hype surrounding a new trade deal fades. And for those like me who are invested, we need to make sure our trade stops are up to date, as well as our new entry levels. This round trip could happen very quickly.  Rodney | Rodney Johnson, Senior Editor, Economy & Markets For more than 20 years, Rodney has studied how people spend their money as they go through predictable stages of life and how that spending drives our economy. READ MORE » | | | 
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