Global stocks received a bump after the G-20 meetings concluded at the end of June. The big story out of the weekend was the "trade truce" between the United States and China. The two economic superpowers had been locked in an ongoing trade war.
A deal appeared to be close in the spring, but the structure fell apart as China was unwilling to compromise on several key issues regarding its technology sector.
Li Xiangyang, the director of the National Institute of International Strategy in China, recently floated the possibility of a "decoupling" between the U.S. and China.
The geopolitical implications of China’s economic rise make this struggle a zero-sum game in the eyes of U.S. strategists. In the eyes of Chinese strategists, this means that the U.S. will not move forward on a trade agreement that does not lay a foundation to constrain China’s economic rise.
This is a strategy that would spark fight in a middle power, let alone a budding great power like China. Investors should prepare for sparks to fly between the U.S. and China on the economic front as we move into the next decade.
Stocks that are dependent on China-based growth like Boeing (NYSE:BA) and Caterpillar (NYSE:CAT) should be considered a bigger risk in the second half of 2019. Both stocks have beaten back headwinds and are up at the midway point. Shareholders or prospective buyers should be watching trade talks closely.
