Trade war scare of experts and may grow into a recession

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After the G-20 summit, the markets reacted quite positively to a 90-day truce between China and the United States. However, yesterday over stocks USA hung a dark cloud. S&P500 lost more than 3.2% for the day. The fact that the lack of detail after the meeting between President Donald trump with his Chinese counterpart XI Jinping has raised concerns in respect of two of the largest economies in the world. It turns out that Monday was glad for the results, but then when I ponder where this will lead, I realized that I in fact will not change.
Trade problems have not gone away, and the two powers continue to be on different sides of the solution. Therefore, the market appeared a lot of skepticism as to how significant was the joint statement.
Contradictions also exist in the words of the President of the United States Donald trump. The agreement between China and the United States included the sale of agricultural and industrial goods from USA to China. And trump said, “the Deal will have an incredibly positive impact on… each type of product.” However, the deal includes such goods are: soybeans, oranges, pistachios and red wine, but not pork, as was expected by the farmers of the United States. And who will buy these products? Private entrepreneurs will not do for a higher cost. Turns out – the state of China?
The Senator from Iowa Chuck Grassley sees this situation in a negative light: “I’m not going to say that we have not lost some markets, but this loss will be greatly reduced. Yes, it probably will restore our markets, so the long-term problems that we have would be, can become less serious.”
Investors have listened to this odd deal, I realized that nothing had changed, and began to fix long positions in the stock market.
In addition to the questionable agreement between China and the US negative added the situation on the bond market. The growth of short-term Treasury bills on Tuesday was higher than paid by longer-term government bonds. This rare situation has sparked new fears that the fed’s decision to increase borrowing costs could damage the economy, especially for businesses that are sensitive to rates, such as housing and car sales. Many economists remember the past – when 2-year paper ahead of the yield on 10-year-old, it was always preceded by a recession of the economy.
Concern over the slowdown in economic growth and trade dispute with China turned into a wailing wall for the US stock market. All this causes great uncertainty for investors and exacerbating concerns about slowing growth as tariffs lead to higher prices for goods, thereby increasing sales and profits of American companies. One follows the other.
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Katya Frankel
The head of the analytical Department of the company,
Finist