Are stock market investors too accommodating with a large-scale explosion between China and the United States? Here’s what Wall Street experts say

It may seem that the mood of the world’s superpowers could not have come at a more inconvenient time: in the midst of a pandemic, which was first identified in Wuhan, China in December, and infected more than 5 million people around the world. world. world, according to data added by Johns Hopkins University.

As MarketWatch’s sister publication Barron writes, the Chinese-American problems are many and include measures taken by the United States. United States To censor China’s new security rules that threaten the semi-autonomous state of Hong Kong, restrictions on Huawei Technologies, a push to increase control of Chinese companies listed in the United States, funds for the ‘World Health Organization and responsibility for managing the viral epidemic that has probably led to one of the most severe global recessions in the past 100 years.

“The list is as long as my arm,” said Ian Bremmer, founder and president of the Eurasia Group, of Sino-American tensions, in an interview on CNBC Friday.

“It is never good that the two largest economies in the world are in trouble,” Peter Boockvar, chief investment officer of the Bleakley Advisory Group, told MarketWatch on Friday.

However, the tensions between the countries do not seem to have supplanted the intense concentration of investors on the reopening of the American economy. United States And in other parts of the world, or watch out for a cure for the COVID-19 pandemic, which helped increase the risk of property.

“I think the market is probably seeing the upside risk of looking for a vaccine or treatment in the short term, and the downside risk of China in the long term, so they are more focused on short term right now “Lindsey Bell, chief investment strategist at Ally Invest, told MarketWatch on Friday.

Friday, the Dow Jones Industrial Average,
DJIA
-0.03%
the S&P 500 index
SPX
+ 0.23%,
the Nasdaq composite index
COMP,
+ 0.42%
It registers dull movements, even when the indices register all the weekly gains with notches of more than 3%.

The Russell 2000 Small Cap Index
RUT,
+ 0.59%
It rose 7.6% during the week, suggesting that investors have taken over smaller-cap companies, which are more sensitive to economic downturns, in the event that efforts to restart businesses are successful.

General action in EE actions. United States It has been tilting upwards since the indices bottomed out on March 23, but it has become more cautious because the catalysts to act in practically all directions for an extended period have not materialized.

Could tensions in China and the United States trigger a new eruption? It is impossible to know how this current political situation will develop, but the conflict deserves to be observed, according to some experts.

“The renewed tension between the United States and China is undoubtedly rekindling a market risk that had been somewhat shaken during the pandemic crisis,” Katie Nixon, IT director of Northern Trust Wealth Management, told MarketWatch.

“In the midst of a recession, we expect these tensions to contribute to market volatility, especially as we head into the US presidential election,” he said.

“After rising more than 30% from March lows, the bar is significantly higher. As concerns about China grow, we believe investors may be too accommodating here and now,” said Ryan Detrick , principal market strategist at LPL Financial.

“The economic recovery is still very fragile and any further repercussions between the United States and China could stop the rebound in stocks fairly quickly,” he told MarketWatch.

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Since 2020 is a year of US presidential elections. In the United States, some strategists point out that the relationship between EE. United States And China can serve as a centerpiece in the virtual campaign.

Evercore IS analysts Sarah Bianchi and Don Straszheim say that since January, the share of American voters who say China is an “enemy” has risen to 31%, while the percentage who says China is a ally or friend dropped to 23%.

“President Trump must increase voter turnout from his base in Michigan, Wisconsin or Pennsylvania to ensure his re-election, and this question provides the perfect fodder,” analysts wrote in a summary of the recent discussion on the role of the American politics. China in the elections.

“It also allows [Trump] to deflect criticism from his COVID-19 response and attack the vice president [Joe] Biden to try to make the choice a choice between the two, rather than a referendum on the coronavirus, “wrote analysts.

Other strategists argue that the United States is susceptible. United States Rework your supply chains outside of China, right after your phase one trade agreement. If we believe this, the ongoing conflicts in China may have less impact, some speculate.

“My view has been and continues to be that we are going to launch an aggressive plan to rebuild supply chains here (as well as infrastructure spending),” said Peter Tchir, director of macro strategy at Academy Securities, at MarketWatch.

“So from a market point of view, I think it’s partly noise, but more because we will be moving away from China anyway,” he said.

Redesigning supply chains may mean that the global economy has returned to normal following the global public health crisis.

In any case, Paul Schatz, president of Heritage Capital, told MarketWatch that investors should prepare for a drop in capital in the coming weeks which could be triggered by disappointment in the reopening of the economy or another catalyst.

“I think the next 3-6 weeks could see the biggest drop from the bear market trough on March 23. If so, the Dow Jones should hit its May low and reach at least 22,000, “he said.

That said, Schatz is optimistic about the long-term market and predicts that the Dow Jones will reach 30,000 and that the overall market will be “double digits higher” in the next 9 to 12 months.

As far as China is concerned, Schatz says he thinks Trump will not risk jeopardizing the growing economic pain in the United States by closing the horns with his counterpart, President Xi Jinping.

“I don’t think Trump and his colleagues are putting anything in jeopardy for the economy and what will be a nascent recovery.” In other words, I think it’s just a saber that smacks for the most part. “

Bulls on the stock market bet he is right.