Weekly Market Commentary 07/27/2018

A welcome détente in the trade war cheered investors this week, although the tenuous ceasefire struck between President Trump and President Juncker of the EU Commission can hardly be described as a rock-solid prelude to friendlier geopolitical relations. That said, the ambiguously-worded truce does remove the near-term threat of the U.S. imposing 25% tariffs on auto imports from Europe and Europe retaliating in kind – a tit-for-tat sequence that could slice a meaningful fraction from U.S. growth next year. What’s more, although the agreement by the transatlantic trade partners to hold off on any new tariffs while negotiations proceed is encouraging, the thorny issue of how to deal with the elephant in the room, China, remains unresolved.