US stocks reached all-time highs this week as optimism grew that Trump and Xi have a trade deal on the way and the US Federal Reserve would lower interest rates later this week.
On the trade front, President Trump reaffirmed that "Phase 1" of the deal is largely complete after China's leadership said the first part of the agreement was "basically done" over the weekend. The first part of the deal is reported to include Chinese concessions on intellectual property, agreements to buy more US agricultural products and additional freedoms for US financial firms to operate in China. In return, the US is canceling a scheduled round of tariffs aimed at $250 billion in Chinese goods. President Trump has stated that he would like to sign Phase 1 with Xi at APEC next month in Chile.
Meanwhile, in bond markets US Fed Chair Jerome Powell is expected to deliver his third consecutive rate decrease this week to juice an economic recovery that is showing signs of strain from old age. US government yields rallied due to the optimism on the trade front, but futures markets still see two rate decreases from the Fed between now and June of 2020. Equity markets applauded the news by lifting US shares to a record high with the S&P 500 trading 3,040- up about 6% in the last six months. Meanwhile, the Shanghai Composite rallied to 2,980 for a nearly 8% rally in just the last two months.
Unfortunately, commodity markets seem to be taking a more moderate view of the economic outlook,…