This year Columbus Day was observed on October 14th, a holiday which commemorates the arrival of Christopher Columbus to the New World. Incidentally, this week also marks the turning point in the trade agreements between the US and China. The negotiations have just begun, and this small deal was touted as ‘Phase 1’ of a broader trade deal between the two countries. But some uncertainty still persists as the WSJ.com reported earlier that “…roughly $50 billion in farm products touted by President Trump is far beyond what China has historically spent in any one year and would likely require Beijing to lean heavily on its state-owned farms to accomplish….. Beijing is pushing the U.S. to drop plans to impose new 15% tariffs on $156 billion in consumer goods starting Dec. 15th and could use the farm purchases as leverage.”
According to the US Department of Commerce, US exports of soybeans, sorghum, pork and other agricultural products to China peaked in 2013 at around $29 billion, falling to $24 billion in 2017. Despite the uncertainty and vague details about the trade deal, the equity markets were boosted by the optimism on hopes of the trade deal being signed as the progress seems real this time around.
This is the first time in a while that we have had back to back Fridays (10/4 and 10/11) when the S&P 500 was up more than 1%. Historically, this has bullish implications for the equity markets. According to sagacious folks at Bespoke Investments, “this was just the 6th time since the bull market began in 2009 that the S&P has gained more than 1% on back-to-back Fridays”. Below is the chart of how the S&P 500 has performed in the later months after such occurrences in the past.
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