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A less hostile relationship between the U.S. and China would be welcome news to investors in 2021. But it’s so out of the realm of possibilities, that one legendary name on Wall Street considers it to be no more than a potential upside surprise to markets next year.
“The biggest surprise out there is the U.S. relationship with China. Right now both sides — the Trump administration and Biden — have engaged in pretty hostile rhetoric with China. China is the second largest economy in the world, and it doesn’t make sense for the first and second largest economy to be fighting with each other. Changing that relationship would be a welcome surprise,” Byron Wien told Yahoo Finance Live. Wien, 87, is vice chairman in the private wealth solutions of Wall Street giant Blackstone Group.
It’s unclear how President-elect Joe Biden will precisely approach relations with China after four tumultuous years under President Donald Trump. Under Trump, the U.S. has slapped China with tariffs on a range of goods and sought to limit the power of tech powerhouse Huawei. Trump has also slammed China for its handling of COVID-19.
While Biden is not seen as an apologizer of China, many on the Street do believe he will take a modestly softer touch on dealings with the country. The appointment of former Secretary of State John Kerry as a climate czar by Biden is already being viewed as favorable to U.S. relations with China. But make no mistake, Biden has his work cut out for him given China’s rising economic influence globally. First on his plate with regards to the country is whether to continue with Trump’s tariffs.
Despite the contentious relationship between the two economic superpowers (and the economic threat of the raging pandemic), the market has continued to power high in 2020.
Investors sent the Dow Jones Industrial Average above 30,000 on Tuesday for the first time ever, on the back of expectations for a COVID-19 vaccine by year-end and the potential for former dovish Fed Chief Janet Yellen becoming Biden’s Treasury Secretary. So to Wien’s point, any less harsh rhetoric between the U.S. and China would be a surprise — one unlikely to be priced into asset values today.
Expect to hear more from Wien on this possible major market catalyst in January, when he releases his annual “10 Surprises” list to investors. By then, we may be pushing Dow 31,000, absent the pullback in tariffs on China by president Biden.
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