Analysts’ take on the truce
The markets cheered the temporary trade war truce between the US (SPY) (IVV) and China (FXI). However, not many market participants and analysts are convinced that the truce will lead to a long-term resolution.
90 days is a short period
As reported by CNBC, ING Bank said, “90 days to work out a broad agreement is very short. Especially because the agreement should also encompass a deal on more sensitive issues like the theft of intellectual property and forced technology transfers in joint ventures. Most wide-ranging bilateral trade agreements take years to negotiate.”
In a note, RBC Capital Markets said that “A lot will depend on developments in the next 90 days, but given the US and China are on different pages, we don’t think the optimism can last.”
Goldman Sachs and JPMorgan Chase
As CNBC reported, Goldman Sachs (GS) is also skeptical about achieving a complete resolution and elimination tariffs. Goldman Sachs said, “We think the chance of a comprehensive deal that involves rollback of tariffs is slightly higher than before, but still not our base case.” Goldman Sachs analyst Alec Philips thinks that the concerns regarding “higher and broader U.S. tariffs remains.” He also added that the pause will only prolong the period of uncertainty.
JPMorgan Chase (JPM) also thinks that while the current ceasefire is favorable for risk, the concerns aren’t going away. The stocks will likely be vulnerable to US-China talks. JPMorgan Chase also thinks that until there’s a formal agreement in place, companies will be “wary of making permanent decisions on supply chains and investments.”