There was a lot of hoopla around the new USMCA trade deal announced this week. We believe the political capital is worth more than the deal however. Pulling back the cover, we found very little to benefit financial markets. After the announcement CNBC Asia called our CEO Robert Luna to ask his view on the agreement.
“While the positive momentum in negotiations is a good sign, China is still the major issue. Canada and Mexico our second and third largest trade partners together make up approximately just 1/4 of our trade with China” said Robert. This North American alliance will help put pressure on China, but a deal may still be pushed out into the future. With lower guidance for corporate earnings in 2019 and a slowdown in GDP predicted by the Fed over the next 2 years, access to global market is more important than ever in our view.
China has already begun to announce an economic stimulus package to spur their economy. This stimulus may be a sign they are preparing for this to last a bit longer. We are in the process of analyzing benefactors and losers of a prolonged trade standoff as we prepare our strategic outlook and portfolio positioning heading into 2019. We will keep you up to date on our latest views.