Two of President Donald Trump's priorities – a strong stock market and a tough trading deal in China – are in conflict. The conflict is frustrating Wall Street, as it chases a moving target for pricing in a given outcome.
The merchants hang on to each president's word and are looking for a relief in his rhetoric and a potential softening in the ongoing trade war.
If tweets are any indication, presidents switch focus. Over the past two weeks, his Twitter remarks on trade-related terms have doubled his remarks on the economy and stocks.
So far, Trump has tweeted about seven times a week on topics in China, trade and tariffs – the same average frequency for jobs, stocks, and finances. During the week of May 5, his China and trade names rose to about 46 times, while he mentioned economy-related phrases about 17 times, according to his Twitter flow analysis. There is some overlap, as he sometimes bundles several topics in the same tweet.
"Tariff Man", which Trump once described, wins the battle of Presidential personalities, and "Dow Man" just needs to take a back seat for a while.
& # 39; It's Impossible & # 39;
Wall Street analysts find the job of predicting the president's way of thinking on a daily basis for clients to be a difficult task.
"It's impossible – the risk reward here is that almost all of this is according to President Trump's own discretion," said Raymond James Washington, political analyst Ed Mills. "You can't quite know what his intention is."
On the one hand, Trump appeals to his base with a tough stance on trade before the 2020 election. But economists say less trade between the world's largest economies threatens to slow growth, at least in the short term.
It takes a toll on the global growth expectations and thus the stock market. Dow Jones Industrial Average – Trumps report to a strong economy – dropped 600 points Monday after new rounds of repayment prices. It rallied on Tuesday on more trade optimism and moved again higher on Wednesday. Overall, Dow is down a little more than 3% since Trump escalated the trade war 10 days ago by tweeting a threat to raising tariffs on China, which he followed through on Friday.
"The problem is that the president has two conflicting opinion polls here," Fundstrat Washington strategy strategist Thomas Block CNBC said. "He obviously sees Dow and has friends who probably call him and say" Donald, we're being killed "- that's why it's one side of Donald Trump. But it has also come to a very political side."
The political side has increased rates from 10% to 25% of $ 200 billion in Chinese imports. The United States also takes the necessary legal action to release another round of 25% tariffs of $ 300 billion for imports, which would happen in June early. Block the highlighted uncertainty that he said leads him to tell customers to "stay sideways".
"If I felt I understood Donald Trump's mind better than anyone else and had great confidence in the result, the Fundstrat would have to pay me more money than they could afford," says Block.
Block said his instinct is that "some sort of agreement" is made around a meeting in June G-20, but he said that Trump's priorities, and thus the public position, could change at the last minute.
"Turn on a dime"
Isaac Boltansky, director of policy research for Compass Point Research & Trading, also navigates this weak market, saying customers are "aware that this story can hit a dime".
"The near-miss sentiment shift has been unequivocally justified on the latest developments, but investors realize that the president could change the market view with a single tweet, "Boltansky said.
Trump rolled out" Tariff Man "persona in a tweet in early December, one month that saw S & P 500 fall 9.2% in its worst month since the financial crisis.
But the approach has been playing its base and is part of the campaign's strategy title by 2020. Trump also uses the position of ammunition against the democratic candidate and former vice president Joe Biden, who supported the Pacific-Pacific partnership
"Tariffs are focused right on Trump's election chart, especially country states, "says Dan Clifton, a partner and head of policy research for Strategas Research Partners. "At the same time, Trump can make a compelling case that Biden has been weak in China, and a reconciliation with China benefits his re-election."
China has responded to US tariffs with its own $ 60 billion increase in US goods. It hits the peasants at "every angle", according to an economist at the American Farm Bureau Federation. To limit the effect of Beijing's rescheduling mission, Trump said this week that farmers would receive about $ 15 billion in support. His campaign focuses on the fact that farmers will support Trump despite the battle for American agriculture.
"An agreement with China to end its bad behavior would bring even more long-term benefits to the economy," said Tim Murtaugh, Trump's communications manager, CNBC. "Farmers are patriotic and understand that someone must finally call China to account."
Murtaugh also pointed to a booming economy, another focal point by 2020. GDP growth increased by 3.2% in the first quarter – the best start of one year since 2015. In April, unemployment fell to its lowest level since 1969.
10% drops before he changes melodies
But changes in trade winds threaten that boom, according to several economists. An estimate from Oxford Economics gives the loss per household about $ 500 at current tariff levels. If the White House adds tariffs to all imports from China, the US economy would be about $ 100 billion less by 2020 and translate into $ 800 loss per household.
"US politicians are willing to accept some pain because they think the pain imposed on China will be greater than the United States and force China back to the negotiating table," Clifton said. "The key is how this affects the economy."
Raymond James & # 39; Ed Mills said stocks still have room to fall before Trump facilitates the rhetoric on the deal. Shares would have to experience at least a 10% correction "before Trump starts talking up the prospects of a G-20 timed deal", Mills Trump and his Chinese counterpart, Xi Jinping, are expected to meet at next month's G20 summit.
"China made a decision that there is only so much pain that the Trump administration is willing to take from the stock market before it changes his tune, "said Mills.
According to former White House chief strategist Steve Bannon, Trump's chances are narrow, and in a CNBC interview on Wednesday, Bannon said that There is no chance that the president will return to the global standoff.
"It would be very easy for him to sign a deal where they bought more soybeans and have cheerleaders on Wall Street, say this is amazing and the stock market goes up for a while," Bannon told CNBC's "Squawk Box" Wednesday. "This cuts the core of what the United States will be in the future."
Look at: Bannon on whether Trump is coming back in the China Trade War