China trade deal jeopardizes stock market, portfolio manager says
If a U.S.-China trade deal isn’t reached soon, the stock market could be in big trouble.
“This is very much an overhang to the market. It’s an overhang to risk sentiment,” said Northern Trust Wealth Management Chief Investment Officer Katie Nixon during an appearance on FOX Business’ “Mornings with Maria” on Monday. “Probably one of the biggest risks in the market right now is that we don’t get some sort of a deal by the end of the year or soon thereafter, or at least a deal to make a deal.”
What's more, Nixon said a deal isn’t priced in.
“It would be a big upside surprise,” she said.
Chinese President Xi Jinping vowed last week to increase China’s imports, lower trade barriers and build up protection of intellectual property rights. But in Nixon’s opinion, it’s not an indication that a deal is brewing with the U.S., adding that the tit-for-tat tariff battle also has implications for the economy.
“And if you think about what’s on the minds of corporate America right now, when you listen to the third-quarter earnings calls,” she said, “most of them commented on the uncertainty around trade and tariffs as potentially impacting their ability to spend on capital spending.”
However, added Nixon, investors are the most vulnerable.
“The S&P 500 is much more exposed to the trade and tariff situation in China,” she said. “Complicated supply chains. Global supply chains and the market is more exposed, therefore investors are much more exposed to the tariff issue than maybe they think they are reading in the front page of the paper.”
Vice President Mike Pence arrived in Tokyo on Monday, and will likely discuss the trade dispute with China as he begins a week-long tour of Asia.
This comes on the heels of Secretary of State Mike Pompeo and Defense Secretary James Mattis meeting last week with their Chinese counterparts.
In Nixon’s opinion, China will also become an issue for global markets.