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Trump’s Win-Win Situation

If the U.S. trade negotiations with China dissolve without a deal it will be detrimental to the global economy, but it might benefit the U.S. economy.

The risks are high.

President Trump believes that the U.S. economy is strong in part because of these tariffs.  In recent weeks his representatives have said that he intends to play hardball because the U.S. economy is benefiting from this, and he sees no reason to cave to any of the demands China may try to add onto the existing deal.

President Trump has also clearly proven a willingness to walk away from a deal in the past, and he has said before that if you are unwilling to walk away from a deal, you’ll never get the best deal possible.

In this particular case, because the U.S. economy is doing well in the face of these trade issues, I believe that President Trump finds himself in a win-win situation.

  • If the deal falls apart, I believe that he believes that the U.S. economy will do better.
  • Because of this, his demands are higher than they otherwise would be.

Not only is President Trump likely to be unwilling to cave to any of the demands that China may bring to the table during these negotiations, but he may also add demands himself that go over and above what he is already demanding from China.

I am not sure that President Trump even wants a trade deal to be successful, he probably believes that the United States is better off without a trade deal anyway, and if a trade deal gets signed, I believe he will demand that deal to be an extraordinary one that is strongly in favor of the United States.

  • President Trump is looking for a great deal or no deal at all.
  • He is willing to walk away from these negotiations.
  • He is pushing China, and China does not like to get pushed.
  • There is an extremely high probability that this deal does not go through.

Accordingly, if a deal falls apart the U.S. economy may benefit, but the NDX, SPX, and DJIA are comprised of companies that participate in the global economy, not just the U.S. economy, and those global players will likely get hit if international economic pressures mount.

DOJI patterns have developed in all of these markets for weeks, and we should trust the market to know best.  In our opinion, the charts tell us what to expect and how to position ourselves.

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