We may be nearing an end to the U.S.-China trade war.
China just offered to go on a six-year buying spree of U.S. goods to help rebalance trade between the two economic superpowers.
“By increasing goods imports from the U.S. by a combined value of more than $1 trillion over that period, China would seek to reduce its trade surplus -- which last year stood at $323 billion -- to zero by 2024,” as quoted by Bloomberg.
That news comes on the heels of a report that U.S. officials are debating lower tariffs on Chinese goods to incentivize Beijing to make deep concessions.
In fact, Treasury Secretary Steven Mnuchin has suggested rolling back tariffs on goods on China to calm markets, according to the Wall Street Journal. All as we near March 1, 2019 -- the deadline for U.S. tariffs on Chinese products to jump from 10% to 25%.
If we see progress, small cap stocks could begin to push aggressively higher.
Small cap companies are usually seen as being able to withstand global pressures better than their larger counterparts. But that didn’t turn out to be true with the trade war, as the Russell 2000 sank more than 15% in the last few months.
In fact, according to CNN:
“Chris Gaffney, president of world markets at TIAA Bank, said investors jumped to the wrong conclusion about how smaller US companies would fare in light of weaker demand from China and other international markets. “Even though many of them may not export products to China, they make supplies for companies that do.”
However, if the trade war is nearing an end, we could see a sizable recovery in small cap opportunities, including a very oversold Russell 2000. Everything from technology and biotech, to commodities and telecom small cap stocks could be major beneficiaries.
Even oil prices are swinging higher on hopes for calming trade war tensions.
Just last Friday, oil prices rallied 3.3% and could push higher.
“I think as long as the global economy isn’t collapsing, we should be able to climb a little bit higher, but it is going to be very fragile because the biggest, biggest uncertainty right now is the trade war going on between the U.S. and China,” noted Amrita Sen, chief oil analyst at Energy Aspects, as quoted by CNBC.
As long as there is progress between China and the U.S., we could see an end to the trade war prior to the March 1, 2019 deadline for U.S. tariffs.
And if that’s the case, there are plenty of opportunities waiting to be had. Be sure to stay tuned to The Cheap Investor for more on this developing story.