Trading Nation

With a potential shutdown deal in place, four experts weigh in on the looming trade deadline

Markets surge as lawmakers reach tentative shutdown deal — Watch four experts explain the move
Markets surge as lawmakers reach tentative shutdown deal — Watch four experts explain the move

U.S. markets are rallying Tuesday as lawmakers have reached a preliminary deal to avoid another partial shutdown of the federal government. The Dow rose nearly 1.5 percent while the crossed above its 200-day moving average for the first time since Dec. 4. But as one deadline passes, the next looms.

Four experts weigh in on what to expect as the March 2 deadline for a trade deal with China closes in:

• John Bilton, head of global multi-asset strategy at J.P. Morgan Asset Management, thinks that, even if a resolution between the U.S. and China is reached, plenty of loose ends could remain untied for the foreseeable futures. "We want to see a deal, absolutely," Bilton said. "Will it unwind the tariffs that have been put in place, or address some of the key questions around intellectual property rights, cybersecurity, etc.? Maybe not. This could rumble on for a while."

• UBS' chief U.S. equity strategist, Keith Parker, questions whether China's economic stimulus activity can help global trade activity turn over. "I think we see signs that China is stimulating their economy, and I think a key is, do we get trade activity – which turned negative in the fourth quarter – that source of external demand stimulus for many countries, does that turn positive to help turn the global manufacturing sector?" Parker asked.

• James Paulsen, chief investment strategist at The Leuthold Group, actually questions whether or not a deal that shrinks the United States trade deficit with China would actually boost U.S. stocks. "We're all hoping that President Trump can win the trade war against China and others, and there's this unwritten assumption that if he does, it will be good for us and it will be good for the stock market and the like, but if you look back, historically, to 1970, and you look at the relative performance of U.S. against foreign stocks, there's a really close relationship between that and what our trade deficit does, and it's almost the opposite of what you'd expect," Paulsen said. "U.S. stocks have outperformed foreign stocks when our trade deficit worsens, historically … but when our trade deficit improves, international stocks outperform the U.S."

• Ron Sanchez, chief investment officer at Fiduciary Trust, thinks that, at least in the near term, economic indicators point toward a bullish outlook. "At least for the balance of the year and into 2020, I don't believe that we retest the lows that we had on Dec. 24," Sanchez said, citing clarity from the Federal Reserve and positive news on avoiding a potential government shutdown. However, Sanchez thinks we need to clear the hurdles of a trade deal with China and the March 31 Brexit deadline before reaching any concrete conclusions. "I think in both of those instances, in our expectation, we don't see escalation … I'm not sure you get a great deal on March 1, maybe they continue talking, but I do think that it will be good enough news."