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This is the 'dry tinder' that could set off explosive growth, top investor says

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This is the market's next big catalyst, top investor says

Investors are laser-focused on trade talks in the hopes that progress on Friday could bring relief to markets and the economy.

There could be a different kind of "dry tinder" that could provide the U.S. with a major injection of stimulus, according to Scott Ladner, chief investment officer at Horizon Investments.

"The most surprising thing that not many people are talking about right now would be a [refinancing] boom, a refi wave here in the U.S. which we actually think conditions are fairly well set up for. That would be a big surprise and that'd be a form of fiscal expansion in the United States," Ladner said on CNBC's "Trading Nation" on Thursday.

Consumers refinancing existing mortgages or other loans could lead to increased activity in the homebuilding and homebuying market as well as encourage more spending across the board. Strength in the consumer has been credited with staving off a recession in this late-cycle phase of the economy.

Housing data is already picking up as mortgage rates decline. Housing starts and building permits increased to a more than 12-year high in August and home resales are their highest in nearly a year and a half.

"The consumer is in absolutely fantastic shape, and the conditions are really set up for them to kind of take advantage of this refi boom, where rates are right now. And that's something people just aren't looking for," said Ladner.

As for the trade overhang, Ladner says actions speak louder than words, and the two sides look more likely to work toward a deal than not.

"Listening to the banter back and forth has been really very confusing, and frankly, kind of tiring, because both sides have been in a posturing situation for some time now. What we prefer to do is actually look at some of the actions from both parties that tell us whether they actually want to get a deal done," said Ladner.

For one, he says, President Donald Trump has not antagonized China in the same way he has his other perceived political foes — this to Ladner suggests he is more sensitive to this issue and open to working toward progress.

"China, on the other hand, could really be using their currency in a much more forceful fashion to blunt the effects of the tariffs. That they haven't done so, we think actually shows their hand that they actually want to get something done here as well," said Ladner.

Trump said Thursday that talks between the two countries were going "really well." He plans to meet Chinese Vice Premier Liu He on Friday afternoon.

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