“Two big gifts have rained down on the markets: the trade truce between the United States and China and the new expansive attitude of central banks, first and foremost the Fed”. This is what Alessandro Fugnoli, Kairos' strategist, claims in the latest episode of his video column “Al 4° piano”.
On the first front, according to Fugnoli, the one between Washington and Beijing should be interpreted as a "strategic-political" truce. The conflict between China and the United States it has deep roots and the issue will not be completely resolved even in the next few years. However, the ability to contain this conflict and ritualize it in meetings and agreements is very important for the market, because it clears the field of the risk of sudden conflicts that could negatively surprise investors. We are now in a negotiation phase which will most likely lead to an agreement. An agreement that only 2-3 weeks ago seemed impossible to reach".
As for central banks, the American one "should have raised rates by at least 2019 basis points in 50, at least on the basis of forecasts considered valid until the end of last year - recalls Fugnoli - Instead, earlier he announced that he will not raise them and now he has begun to make it clear that it will lower them. Initially, the markets thought that the maximum reduction could be 50 basis points, while now some analysts are going as far as to hypothesize more substantial cuts, up to one percentage point. This would completely change the scenario this year, considering that both shares and bonds are priced on the rates that central banks determine”.
But all this has a price: “The world economy continues to slow down – underlines the Kairos strategist again – The phenomenon is starting to involve the United States as well and will last a few more months. For this reason, Trump has changed his attitude towards China in a spectacular way, making much more modest claims than in the past and which will almost certainly be accepted. This derives from the fact that Trump is aiming for a functioning economy and a stock market that continues to record new highs for his re-election”.
