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A China trade deal could cancel Federal Reserve interest-rate cuts

Ivan Martchev
A China trade deal could cancel Federal Reserve interest-rate cuts

A new high for the U.S. stock market before a trade deal with China is completed was a surprise, even though we had another “90% done” quote from the Trump administration this week. The moral here is never to underestimate the ability of the Twitter account of the U.S. president to create a short squeeze in stocks, particularly if the Federal Reserve has already more or less promised that a July federal funds rate cut is coming. Despite the weakening of manufacturing indexes in the U.S. to 10-year lows, it is rather telling that if one were to compare the largest junk bond ETF by assets, the iShares IBoxx $ High Yield Corporate Bond ETF (HYG) with the largest stock ETF, the SPDR S&P 500 SPDR (SPY) one would see similar strong performance.