There may be no end in sight to the trade wars; why that could be good for equities
(Kitco News) - President Donald Trump is incentivized to keep the trade wars looming until the presidential election of 2020 because the Fed will be more likely to keep rates low, thus elevating equity markets, this according to Christopher Vecchio, senior currency strategist of IG Group.
“For President Trump, perhaps the worst thing that could happen is if a trade deal does come together in the sense that the Fed would have less of a reason to keep rates low and stocks could struggle heading into 2020,” Vecchio said.
However, with President Trump signaling that he is willing to push any resolution to the trade war negotiations with China to beyond the 2020 presidential elections, the U.S. economy could see a slowdown, particularly in certain sectors.
“One thing that really sticks out to me right now with this trade war is that farm bankruptcies are up 24% year over year. We’ve spent close to $30 billion bailing out farmers. That’s more than twice what was spent during the auto bail outs,” Vecchio told Kitco News.
On bitcoin, Vecchio still doesn’t see prices skyrocketing anytime soon, for lack of a proper catalyst. “We haven’t seen the spark. Equities are at an all-time high. Gold has come off. We’ve seen all the fears about the U.S.-China trade wars provoking an immediate recession in the United States; those calls have fallen flat,” he said.