US equity markets found little direction in Monday’s session as investors waited for news about US-China trade talks now underway in Beijing. This week’s vice-ministerial talks are supposed to prepare ministerial talks, which in turn are supposed to prepare a Trump-Xi summit at some point in March.
Risk as gauged by the implied volatility of index options in major equity markets continues to drift downwards. This reflects the consensus belief that China will offer up enough concessions for President Trump to declare victory and go home, as the late Senator George Aiken advised the United States to do at the height of the Vietnam War.
China will open its market to selective industries, buy anything the US cares to sell including lots of LNG and agree to protect US IP and know-how. Trump will postpone the threatened tariff hike on Chinese goods to 25% from 10% and eventually rescind the 10% tariffs.
That’s what is supposed to happen, but investors are buying insurance against the eventuality that everything goes horribly wrong.
Even though volatility – the market’s standard risk measurement – continues to fall, the price hedges against extreme outcomes are rising. Gold and US inflation-protected Treasuries are a form of long-term disaster insurance: In a financial crisis, the Fed will add liquidity with abandon, flooding the market with dollars and depreciating its value.United States
Gold is a preferred hedge against such an eventuality, remote as it might be. So are Treasury Inflation-Protected Securities (TIPS), which are indexed to inflation.
As the Fed backed away from its plans to raise interest rates – and called into question its plans to reduce its $4 trillion balance sheet – federal funds futures rose and the gold price jumped. TIPS yields fell – that is, TIPS became more valuable – and the gold price rose. That is remarkable in the context of a benign inflation environment.
Ten-year inflation expectations built into the bond market – the difference between the yield on ordinary 10-year Treasuries and 10-year TIPS – predict an inflation rate of 1.8%, below the Fed’s 2% target. A chill deflationary wind blew through markets at the end of December, persuading the Fed that the risk of inflation was small next to the risk of a market crash.
What could go wrong? Pretty much everything that President Trump has advanced by the way of economic diplomacy has hit a brick wall. US officials are fulminating against Huawei, the world leader in 5G technology, but don’t have an alternative to offer.
Germany’s Economics Minister Peter Altmeier told Die Welt last Sunday that Germany “will not be blackmailed,” referring both to prospective Russian pressure through natural gas supplies over the Nordstream II pipeline and to American efforts to persuade Germany not to work with Chinese telecom providers. “We will not compromise on our safety,” said Altmeier.
“But it is also clear that we are starting the 5G network expansion as soon as possible – also in order to secure Europe a competitive position on the world markets.” The phrase “as soon as possible” means “work with Huawei,” the only provider of 5G technology that can hit the ground running.
By contrast, reported the US website Politico, Trump’s “message to Europe about 5G … has been “go slow. There’s no need to rush into this. We need to figure out how to do this now.”
Former Australian Prime Minister Kevin Rudd summed up the situation in a February 11 interview with CNBC. The probability is high that some sort of interim deal will be announced before March 1 “because both sides have the political will” to pursue a deal, but this will not resolve “the unfolding economic war between the US and China. Rudd added: “If you’re an investor you should be mindful of the unbalanced strategic direction of US-China relations.”
This web site is really a walk-through for all of the info you wanted about this and didn?t know who to ask. Glimpse here, and you?ll definitely discover it.
Hello, I enjoy reading through your post. I wanted to write a little comment to support you.
This is my first time visit at here and i am genuinely happy to read all at alone place.
This blog was… how do I say it? Relevant!!
Finally I’ve found something which helped me. Thank you!
An outstanding share! I’ve just forwarded this onto a colleague who had been doing a little research on this.
And he actually ordered me dinner due to the fact that I stumbled upon it for him…
lol. So allow me to reword this…. Thanks for the meal!!
But yeah, thanx for spending time to discuss this matter
here on your internet site.
What’s up, yes this article is genuinely fastidious and I have
learned lot of things from it on the topic of blogging.
thanks.
Spot on with this write-up, I absolutely believe that this site needs
far more attention. I’ll probably be returning to see
more, thanks for the information!
Hi, I do think this is an excellent website. I stumbledupon it 😉 I’m
going to return once again since I book-marked it. Money and
freedom is the best way to change, may you be rich
and continue to help other people.
Hey! I’m at work surfing around your blog from my new apple iphone!
Just wanted to say I love reading your blog and look forward to all your posts!
Keep up the fantastic work!
Hello to all, how is the whole thing, I think every one is getting more
from this web site, and your views are pleasant in support of new
users.
You could certainly see your expertise in the article you write.
The sector hopes for even more passionate writers
like you who are not afraid to mention how they believe.
At all times go after your heart.
I pay a visit everyday some blogs and websites to read articles or reviews, but
this web site offers quality based articles.
Can you tell us more about this? I’d love to find out more details.
Hi! I know this is kind of off-topic however I needed to ask.
Does operating a well-established website like yours take a massive amount work?
I’m completely new to writing a blog however I do write in my diary daily.
I’d like to start a blog so I can share my personal experience and thoughts online.
Please let me know if you have any ideas or tips for brand new aspiring blog owners.
Thankyou!
You ought to be a part of a contest for one of the highest quality websites online.
I most certainly will highly recommend this web site!
I do believe all the ideas you have introduced to your post.
They are really convincing and will certainly work. Still, the
posts are too quick for beginners. May just you please extend them a bit from next time?
Thanks for the post.
My partner and I absolutely love your blog and find most
of your post’s to be exactly I’m looking for. Would you offer guest writers to write content for you?
I wouldn’t mind composing a post or elaborating on many
of the subjects you write about here. Again, awesome blog!
natalielise pof
Hi, I want to subscribe for this blog to obtain hottest updates, thus
where can i do it please help out.
Write more, thats all I have to say. Literally, it seems as
though you relied on the video to make your point. You definitely know what youre talking about, why waste your
intelligence on just posting videos to your site when you could
be giving us something enlightening to read?
I am sure this piece of writing has touched all the internet people,
its really really fastidious paragraph on building
up new webpage.
If you are going for finest contents like me, just go to see this website every day because it offers feature contents, thanks
Thank you for the good writeup. It in fact was a amusement account it.
Look advanced to more added agreeable from you! By the way, how can we communicate?
Hi there, I discovered your site via Google while looking for a related subject, your web site
got here up, it looks good. I’ve bookmarked it in my google bookmarks.
Hi there, just become aware of your blog via Google,
and found that it is truly informative. I’m gonna be careful for brussels.
I will appreciate should you proceed this in future.
Numerous folks will likely be benefited out of your writing.
Cheers!
Hi! Quick question that’s totally off topic. Do you know how to make your site mobile friendly?
My blog looks weird when browsing from my apple iphone. I’m trying to find a theme or plugin that might be able to fix this problem.
If you have any suggestions, please share.
Thanks!
Thanks for a marvelous posting! I truly enjoyed reading it,
you will be a great author. I will ensure that I bookmark your blog and may come back in the foreseeable
future. I want to encourage that you continue your great work, have a nice morning!