Second Quarter 2019 Market Report

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China Outlook Shows Signs of Improvement

The outlook for a trade settlement with China improved on Sunday, with President Trump announcing a postponement of an increase in tariffs. This comes after progress during recent negotiations in Washington and Beijing. A joint memo of understanding is underway that would cover controversial issues including the theft of U.S. intellectual property and foreign investment in China. 

The key to resolving the trade differences is whether China’s concessions will be substantial and concrete enough for U.S. negotiators. The U.S. wants specific and enforceable provisions before agreeing to lift tariffs. Satisfying the U.S. is not going to be easy and negotiations may drag on for some time. Meanwhile, the current $250 billion of tariffs on Chinese goods will remain.

While economic data out of China may weaken further in 2019 as the tariffs continue to weigh on its economy, Chinese stimulus measures, combined with a possible end, or at the very least non-escalation, of the tariffs, could translate into a sizeable uptick in the Chinese economy later in 2019. This could help overseas equities and more cyclical sectors such as energy, materials and industrials. Chinese stocks have done well in 2019, as the chart below shows. 

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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