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‘It’s Toast’: China Trade Deal Seen Dead Amid Hong Kong Melee. Uighur Bill Goes To Trump’s Desk
Pricing the risk of another conflagration between the US and China is an inherently difficult task, so equities have decided not to bother, apparently. Best leave it to more sophisticated market participants and FX speculators, I suppose.
Wall Street tacked on more gains Wednesday despite a choppy session marred by extremely negative news on the Hong Kong situation and a threat from Donald Trump to shut down America's social media platforms.
Small-caps really are the story right now stateside
Computers and their algos don’t care that the trade deal might unravel or that US-China relations are melting down. No they just react to price action in the here and now.
So in periods where they are the most significant player in the stock market, they react to what the other models are doing and the price movement they engender.
So please join me in saying goodbye to the notion that the stock market is forward looking.
What a quaint old notion that was.
I’m surprised on this site there has been no mention of a Vancouver judge’s decision to smack down Meng Wanzhou’s defence to extradition to the US.
There has. I’m surprised you didn’t see it. https://heisenbergreport.com/2020/05/27/hong-kong-huawei-dramatics-play-spoiler-to-otherwise-bullish-narrative/
H-Man, the current situation looks more like gangrene . You hope the toes end the cutting but you worry when it moves to the leg.
The near term implications of US-China breakage are higher tariffs, less importing, and retaliation against the other country’s companies. (Let’s put aside tail stuff like military conflict, since the market isn’t good at discounting way out on the tails.)
Tariffs and imports are important, but at this particular point, they are way less important than other factors. Suppose, tomorrow, the market were assured that 100MM doses of an effective vaccine will be available in the US in November 2020. Investors would not give a hoot about tariffs on Chinese goods or whether US farmers get to sell soybeans to China. There’d be no rational reason to care about trade, until sometime in late 2021.
The risk of retaliation by China against US companies in that city only affects one of the FANMGs or whatever they are called now – that being AAPL. I think the trading in those few names is so index driven that such a risk isn’t able to have much effect until it is concrete.
That’s my explanation for why the market doesn’t really care about the US / China relationship breaking down.
I still can’t believe that there will be an effective and safe vaccine in a matter of months, what we hear is propoganda about a few different “possible” vaccines. We have gone from “there may never be a vaccine” and “ it will take 12 to 18 months” to trials already and a vaccine by the fall?! There is no way a vaccine can be tested properly that quickly, especially considering it is some new genetically modified RNA vaccine. I guess no coincidence that Fauci and Bill Gates are involved with the company?
Is it called “Operation Warp Speed”? Should be named “Operation Clusterfuck”
I don’t agree, but the point is that compared to things like “vaccine or no”, “consumers return to shops or no”, “another $2TR fiscal package or no”, the ups and downs of US-China trade are pretty minor potatoes. In the short term. Which is all that matters right now.
None of the above matter to the algos
After much hype (and, in some cases, misinformation), we’ve learned that hydroxychloroquine is more likely to hurt you than help you, remdecivir is far from a silver bullet, and the results from Moderna’s accelerated phase I trials are inconclusive. Inovio’s seems to be fading fast after getting out of the gate quickly and Novovax’s candidate hasn’t been given to humans yet. Etc., etc. I would put the chances of someone developing a safe vaccine for SARS-CoV-2 and having it widely available by the end of 2020 at no more than 5 percent.
It seems you have caught up with the esteemed Dr. Faucci who estimated as much earlier when he was allowed to speak. Promising in Vitro tests result in a 90% failure rate later on in testing in normal times. In these times we can expect a higher failure rate. The science is hard, antibodies have more ways to fail than succeed.
This is a good science-based overview (from Cornell) of where things stand. Recommend that everyone who is investing on the prospect of a qucik vaccine read it:
https://allianceforscience.cornell.edu/blog/2020/05/what-are-the-top-5-most-promising-covid-19-vaccine-candidates/
I’m following the science closely.
Here’s the politics of it, as I see things:
– China will discover and approve the Glorious Triumphant Peoples’ Vaccine (GTPV) by year end. It is a political imperative for Xi. China’s drug regulator answers to the Party. It has already demonstrated that political imperative to lead the medical charge against SARS-CoV-2 will overrule scientific rigor: China rush-approved hydroxychloroquine, lopinavir/ritonavir, and favipiravir to treat covid-19 back in February, based on nothing but anecdotals and tiny uncontrolled studies. And China has a history of tolerating dodgy vaccines.
– The US will not permit China to win the race for a vaccine, beating BARDA’s billions and Trump’s Project Warp Speed. What US President could bear begging China for doses of GTPV? The FDA is going to do what the White House tells it to do. Looking at the inexplicable actions of the CDC should leave no doubt that the politicians are in control. So the US will approve the Bigly Awesome Patriots’ Vaccine (BAPV) by year-end.
– The race for a SARS-CoV-2 vaccine is the new space race, the two superpowers are furiously firing off Sputniks and Geminis, neither is going to allow itself to be the loser. We burned astronauts up to win the space race, and we’ll wave away adverse effects and overlook middling efficacy to win this race. As for China, they may have to simply take the simpler route of fudging clinical data… they’re going to have a hard time doing clinical trials in China (having suppressed the virus too effectively) and domestic Chinese pharma doesn’t have any real experience conducting global multicenter clinical trials.
– When multiple vaccines are “approved” and hundreds of millions of doses are “just around the corner”, who’s the market going to listen to? The algos and bullish pharma execs, or nitpicky biotech hedgies whinging about p-values?