The G20 is finally underway and investors are now sitting and waiting in anticipation of whether talks between Trump and Xi can yield a positive outcome. Or has all the rhetoric of the last few weeks been for nothing.
Unfortunately for investors, the meeting between the two President’s won’t take place on Saturday morning which makes today’s trading session all the more interesting. I guess by market close we’ll know just how optimistic investors are because the rest of the weekend may feel like a long time if talks go badly.
That’s assuming of course that people expect the stock market to fall in the event of talks collapsing. They recently hit record highs on the expectation that the Fed will cut rates two or three times before the end of the year, which you would expect is conditional on a deal not being reached. If talks collapse, the Fed will be backed into a corner and almost forced to follow through on rate cuts.
Most people seem to think progress will be made in Osaka though, although not to the extent that a full trade deal is agreed. A truce on tariffs is the base case, with negotiations restarting on the basis of previous deal breakers having been compromised on. Of course, when you’re dealing with someone as unpredictable at times as Trump, base case scenarios seem a bit pointless but I guess we’ll see just how much desire there is on both sides to get a deal done.
Only bitcoin can recover from a 25% decline this quickly
The wild ride continues in the world of crypto, with bitcoin brushing off what would be a devastating 24 hours for any other asset, tumbling 25% in that time, to rebound more than 10% at the time of writing. I say this because this market moves so rapidly that it’s probably out of date by the time I’ve finished writing this sentence.
When it comes to bitcoin, nothing surprises me so predicting whether we’ll end the day back at new highs for the year or in the red is pointless. What is clear is that the Facebook story has re-energised the space in a remarkable way and reminded us of what we were seeing on a daily basis in late 2017. Suddenly $20,000 isn’t looking too far away but as we learned early last year, $3,000 isn’t either.
Gold showing the characteristics of a real store of value
It seems a bit dull moving from bitcoin to gold even though the latter is making headlines of its own after soaring – by its own standards – in recent weeks. Some may like to think of bitcoin as gold 2.0 but days like we’ve seen recently perfectly highlight just how ridiculous that is. How can something be a store of value and a safe haven when it’s price can change so rapidly and aggressively, it just can’t.
Given everything that we’re seeing at the moment, gold is very much displaying the characteristics it’s been long associated with. As the Federal Reserve prepares to cut rates, global economy faces a slowdown and tensions flare in the middle east, the safe haven, inflation hedge and store of value is performing admirably.
Oil stable ahead of Trump/Xi and OPEC meetings
Oil has been relatively stable over the last couple of days by recent standards. The surge we’ve seen has been largely driven by the flare up in the Gulf of Oman and declining inventories but we’re now seeing some pause as prices sit near key resistance and we await the results of two hugely important meetings.
The first is obviously tomorrow’s trade talks between Trump and Xi, with the OPEC meeting in a few days being the other as we wait to see just how committed producers are to output cuts.