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Indices jump as US/Mexico strike trade deal

28/08/2018

Investors reacted positively to news that the United States & Mexico agreed on a new trade deal, easing the uncertainties that investors prefer to avoid. The S&P500 (#SP500) closed a shade under 2,900, and the Dow (#DOW30) at 26,075, its highest level for over 6 months. This agreement is an important step for the US to replace the 24 year old NAFTA tripartite agreement that also included Canada. However, it will also put Canada slightly on the back foot, which is no doubt exactly where President Trump wants them to be. China has also been told that their place in the trade agreement priority list is slipping, which again, is designed to shift their balance slightly. China is different to Canada though, and the plain fact of the matter is that both parties need each other, and both parties know it.  Time is not critical to the Chinese, they are skilled negotiators and they have a tendency towards patience that will long outlast the current US President, even if he does get another term. We are cautiously optimistic for the US economy but experience tells us that buying dips, rather than rallies, is the way to go.

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