Morning Comment: A Delay in New Tariffs is Already Priced-in

Today’s employment report will not be as important as it has been on many other occasions this year. In previous months, it was something everybody was watching because investors believe that it could have had a compelling impact on whether the Fed was going to cut interest rates. Now that the “rate cut” issue is off the table for a while, the employment report will take a back seat to the trade issue for investors. Don’t get us wrong, it’s still an important data point…and if it comes-in at a level that is a lot different than market expectations (in either direction), it could/should still have an impact on the markets, but probably not as big as it would have over the summer and early fall months.

Speaking of the trade issue, we’re now nine days away from the December 15 deadline for new tariffs. The odds that any new tariffs will be initiated are very, very low. If the recent past is any guide, President Trump will say that enough progress has been reached in the negotiations…that the new tariffs will be postponed/delayed. This is certainly what the markets have been pricing-in. So although we will probably get a very mild and a very, very, very short-term bounce if/when a postponement is announced at some point in the next week and a half, it should not be a compelling one. Again, it’s already priced into the markets.

We’d also note that given the fact that the market saw a nice rally after we all heard the chatter a few weeks ago…that at least some of the existing tariffs would be rolled-back under a “Phase One” agreement, a roll-back in tariffs is also already priced into the markets to a meaningful degree. Therefore, even if we get a postponement of new tariffs, the net result will not be particularly bullish…if we get an agreement that includes a roll-back of some of the existing tariffs. (Of course, if we don’t get an agreement….AND the new tariffs are imposed…it’s going to be quite bearish.)

It’s funny, even though the impeachment process now set to move to the Senate, it’s far from a lock that it will be as important to the 2020 election as the trade issue. If the President rolls back the tariffs in a Phase One deal (thus giving away most/all of the country’s leverage for Phases 2 and 3)…and only gets promises of agricultural product purchases (something China has always been willing to give us)…it will be a very weak deal. It will also be something the Democrats will clobber the President on during the general campaign. They will be able to lambaste the President on his claims of being the “The Great Negotiator.” More importantly, it will give the U.S. a material set-back in the country’s goal of forcing China to change their trade practices. In other words, it will be an important victory for China.

Matthew J. Maley

Managing Director

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Dec 06, 2019 — 8:12 AM
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