Trump and Xi call a cease-fire and ES, YM, and NQ futures rally.

Getty Images

This must be the first time in the history of internet search engines that typing in “cease-fire” yields a story on trade in the “Top Stories” section.  On Saturday evening in Buenos Aries, President Donald Trump and Chinese President Xi Jinping agreed to a “cease-fire” or better put, a halt in new tariffs which will avoid escalating the US/China trade war. The Trump-Xi meeting result puts on hold, higher U.S. tariffs on Chinese goods that were due out this week. This should help end the selloff in stocks that were going to be directly affected by some of the new tariffs, such as the proposed cell phone tariff that had hurt Apple (AAPL) stock so badly. The cease-fire could be good news for Tesla (TSLA), Deere (DE) and U.S-listed Chinese stocks such as Alibaba (BABA). Also computer chipmakers like Qualcomm (QCOM) and NXP Semiconductors (NXPI), also could recover from recent selloffs since they would have been affected by the increase in tariffs as well as reduced sales of Apple products. The question now arises; is this enough to resume the bull market?

A Cease-Fire is Not a Peace Treaty

It’s important to note that this is good news, but temporary. The agreement gives China and the U.S. 90 days to make progress on a critical impasse, the theft of intellectual property by China. If no progress is made on this issue after 90 days, the U.S. will raise the existing tariffs on $200 billion of Chinese good that currently sits around 10%, to 25%. Beijing has agreed to restart purchases of U.S. farm goods right away after cutting off U.S. soybean buys, which is good news for farmers and companies like  Deere & Company (DE). All of this is lost however if that 90-day window closes without significant progress no intellectual property theft and that is a big “if”. During the last earnings season, 69% of S&P 500 companies that reported forward guidance, reported negative forward guidance with many sighting trade as the reason. 90 days may turn around next earnings season, but it won’t boost capital spending and means the S&P500 (ES), Dow (YM) and  Nasdaq (NQ) rallies have a potential to be short to medium-term, not long-term.   

The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility. Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex contracts are based on underlying asset classes including forex, stock index futures, commodity futures, cryptocurrencies, and economic events.

Trading can be volatile and investors risk losing their investment on any given transaction. However, the design of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.