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With trade agreement in doubt, five experts share what to watch now

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Doubts emerge on tentative US-China trade deal—Five experts on what to watch next

Stocks are in a holding pattern to begin the week as doubts are raised over how much progress was made between the U.S. and China on Friday.

Chinese officials are reportedly seeking further discussions with the U.S. on trade before they sign "phase one" of a deal announced last week.

Five experts weigh in on what they're watching right now.

Simeon Hyman, global investment strategist at ProShares Advisors, says trade progress could be the last bit of good news for a while.

"I think the trade deal is probably the only real source of upside in the near term because I don't think we're going to have a great earnings season. We have banks reporting this week. You know, it's been a tough environment for banks — deal volume is slowing a little bit, and the yield curve was inverted up until just a week or so ago — so I don't think you're going to get a big impetus from the earnings side. But we certainly know politically, a win on that front sometime as we approach more of the height of the election season is not a terrible thing to bank on."

William Foster of Moody's Investors Service says this gave the U.S. and China some breathing room before they move forward.

"It's a step forward, but it's, you know, we can't expect too much, and obviously you're seeing that right now from China. This basically buys more time for the two sides to try to come to some kind of agreement on some of the core issues, and that will just give the market more time to kind of digest."

Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, is playing it cautiously for the rest of the year.

"If you look at this trade deal, it's probably a political win for both sides, which were in need of such a win. Unfortunately, it just doesn't mean a whole lot for S&P earnings. It probably doesn't mean a lot for economic data, at least not over the coming months. So from our standpoint, you know, you've got good gains in calendar year 2019 even though if you stretch back to Q4 last year they're not spectacular. We're still playing it pretty cautiously, so we are underweight small caps, they tend to be lower quality and tend to have fewer levers to pull. We're also underweight high yield. We think credits are probably a little bit overdone, spreads are very tight. You're just not getting paid to take that risk. We would take some of those dollars and put them in large caps, because again those are the companies that have probably the most, you know, flexibility in terms of navigating this global environment."

Art Cashin, director of floor operations at UBS Financial Services, is skeptical much progress was made at all.

"It's all blue smoke and mirrors. There's nothing substantive there. I mean, I admire Treasury Secretary [Steven] Mnuchin, and he's talking about intellectual properties and whatnot. I'm getting different signals from China. They don't look like they want that to be part of a plan, and they indicate they're going to take care of it locally. Secondarily, so tomorrow the tariffs were supposed to be raised. If I'm a business, I've already traded against that. I knew they were coming up. I bought whatever I wanted back before they were going to get raised, so the impacts are not very strong here."

Gabriela Santos, global market strategist at J.P. Morgan Asset Management, says it makes sense to keep expectations in check.

"It's an agreement to postpone the escalation that was planned for tomorrow and to continue talking over the next few weeks. So for us, I think it's right to temper the enthusiasm a little bit after such a huge rally we had on Friday. It's not locked down. No. 2, even if we end up having a 'phase one' written-down truce, it doesn't remove the uncertainty cloud going into the election. And No. 3, we have also some late-cycle concerns to think about which should come to the forefront as earnings season picks back up this week."

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