EU and US could reach trade deal this weekend - Reuters
Investing.com - The Trump administration's refusal to soften its tone on tariffs and appease anxious investors will likely change "soon," according to analysts at BCA Research.
On Monday, the benchmark S&P 500 index ended at 5,062.25, logging a modest decline after having hovered close to bear market territory -- generally defined as a 20% decline from a recent peak.
Traders are still attempting to understand if the White House plans to impose the tariffs permanently or use them as a cudgle during negotiations with trading partners. On Monday, Trump said "both can be true."
In a note to clients, the BCA strategists led by Matt Gertken argued that, as markets near bear market status, Trump and his advisors "will need to start pivoting."
A bear market could induce a U.S. economic recession, which would raise the threat of a possible "wipeout" of Republican candidates in the next midterm elections and potentially damage Trump's legacy, the analysts said.
"We expect Trump and his team to start issuing exceptions for countries that are entering 'serious' negotiations," they said, adding that the president may begin to instead emphasize a trade war with China over other nations.
U.S. Trade Representative Jamieson Greer is due to tell the Senate Finance Committee on Tuesday that he has been approached by almost 50 countries asking to discuss Trump's sweeping tariffs, according to media reports.
Greer will say in written testimony that several of these countries, like Argentina, Vietnam, and Israel, have suggested they will bring down their tariffs and non-tariff barriers, Reuters reported.
Over the weekend, U.S. National Economic Council Director Kevin Hassett suggested that more nations had reached out to the White House about forging a possible deal.
The BCA analysts said in the note, which was dated on Monday, that they will "book gains on some of our bearish trades by the end of day today to give chance for the trade shock and its aftershocks to fully play out in the market." They also closed out a long U.S. Treasuries and short S&P 500 trade, flagging that it had registered a gain of 19% since its inception.