By CCN: The Dow slumped back into decline on Wednesday, as the US stock market failed to extend its recovery. Meanwhile, a key former Trump advisor warned that there was absolutely “no chance” that the president backs down from his hardline trade war posture despite escalating US-China tensions.
Dow Nosedive Erases Tuesday’s Recovery
The stock market plunged back into decline at Wednesday’s opening bell, and by 9:59 am ET the Dow Jones Industrial Average had shed 133.07 points or 0.52% to slide to 25,398.98. The S&P 500 lost 0.32% to fall to 2,825.46, while the Nasdaq outperformed with a 0.13% dip to 7,724.69.
The mood on Wall Street turned sour on Wednesday, as the trade war teeter-totter left investors much less optimistic than they had been on May 14 when President Trump revealed that he would meet with Chinese President Xi Jinping at the G-20 summit next month.
Steve Bannon: ‘We Hold All the Cards’ – Trump Won’t Back Down
This morning, Steve Bannon – the architect of Donald Trump’s unprecedented presidential campaign – revealed that he believes there is “no chance” that the White House will soften its stance toward China to bring an end to the economic standoff that has pummeled global stock markets.
“China has been running an economic war against the industrial democracies for 20 years,” said Bannon in an interview with CNBC, adding that the trade war “cuts to the core of what the United States is going to be in the future.”
Echoing his former boss, Bannon said that the US has no reason to bow to Chinese pressure, as previous presidents have done. Why? Because “we have all the cards.”
Bannon isn’t the only analyst who believes that the odds of a swift resolution to the trade war are slim, though – unlike him – few view that as a reason for optimism.
Invesco: China Has No Reason to Meet US Demands
Invesco Chief Global Market Strategist Kristina Hooper, for instance, warned investors that they should not be hasty in pricing in a positive trade war outcome. Monday’s 617 point Dow Jones collapse was entirely appropriate, she explained, given how reckless the market had been in assuming that a trade deal was a virtual certainty.
Speaking in a separate CNBC interview, Hooper cautioned that China has no “compelling reason” to make “major concessions” as it negotiates a new trade agreement.
“Since the beginning, I haven’t found any compelling reason why China would want to make major concessions to the U.S.,” Hooper said. “I always expected that either the U.S. would accept minor concessions around making smaller the trade deficit or that there wouldn’t be a resolution to this.”
If Bannon’s read on President Trump is correct and the White House refuses to back down, the trade war could continue indefinitely and perhaps escalate even further. For that reason, Hooper and Invesco do not expect the stock market to achieve any meaningful gains during the remainder of 2019.
In other words, following a meteoric recovery during the first third of the year, it might be time to adhere to the old Wall Street adage: “sell in May and go away.”
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