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On December 2, 2019
Stocks continued their relentless grind higher last week thanks to the usual suspect (non-specific, yet positive U.S.-China trade chatter). Yet the most important event of the week happened late-morning Friday and it’s a potentially trade negative, and that’s why stocks dropped on Friday.
The specific negative trade headline wasn’t Trump signing the Hong Kong democracy bill (as we and others have said, we believe that won’t derail trade talks). Instead, it was a Reuters article that said the administration was considering increasing restrictions on U.S. companies shipping components to Huawei.
If true, that represents a specific trade negative, because while the White House considers Huawei and trade issues separate, the Chinese do not. So, any increase in restrictions with regards to Huawei would most likely be a trade negative and potentially lower the chances of a deal.
That said, it’s just one story, and the market still very much expects a trade deal. As we’ve said many times, we believe there are some very big risks to markets if phase one:
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