Raymond James Analyst Says 10% Stocks Drop Needed for Trump to Come Around

Stocks are going to have to fall a lot more before President Donald Trump eases off his tough rhetoric on U.S.-China trade, said Ed Mills, Washington policy analyst at Raymond James.

Mills wrote in a note to clients Tuesday that equities would have to experience a correction of at least 10% “before Trump starts talking up the prospects of a G20-timed deal.” Trump and his Chinese counterpart, Xi Jinping, are expected to meet at next month’s G-20 summit.

“In the meantime, we expect threats of escalation by both sides in an effort to build negotiating leverage ahead of the G20 meetings,” Mills said. “While there is some hope for continued talks, longer-term expectations are being downgraded on the ability to strike a meaningful deal unless political calculations see a significant directional change over the next couple months.”

Trade tensions between China and the U.S. reemerged last week after Trump hiked tariffs on $200 billion worth of Chinese imports. The president also raised the possibility of slapping tariffs on an additional $325 billion worth of Chinese products.

Stocks have fallen sharply since Trump first threatened to raise levies on Chinese goods on May 5. The S&P 500 and Dow Jones Industrial Average are both down more than 4% in that time period while the Nasdaq Composite has shed 6.3%.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza