Possible Deals to Brexit and China-US Trade War Created A Calm in Stock Markets

Source : GETTY IMAGES

The global stock market took a breather as the Brexit and US China trade war seems to have possible solutions as the leaders tout possible breakthroughs in the midst of political set-backs and scandals.

UK prime minister Boris Johnson suffered a series of set backs on his new Brexit plan as he could not win a single vote in the house of commons, lost his government's majority in the parliament, and his brother, who is a member of the parliament resigned. In the midst of these set-backs, Johnson promises to reach a deal by 31st Oct, which is the new Brexit deadline. The European stock market lifted on the news but investors remain wary if a real deal can be made.

Over at US, president Donald Trump faces his biggest political challenge yet as the congress launched an impeachment action against Trump due to his involvement with Ukraine President Volodymyr and pressuring him to investigate Democratic party's Joe Biden's son involvement in projects associated with Ukraine. Joe Biden is the forerunner in the Democratic party's electoral campaign as a Presidential nominee. The impeachment charge that Trump has mis-use his political power to pressure a foreign leader to investigate his political opponent for personal gain. 

At China, president Xi Jiping is facing an increasing violent action from the 4 month long protest. The withdrawal of the Extradition bill by chief minister did not quell the unrest and the protesters press on their other demands, which include universal suffrage to select their political leaders. Companies who took action siding either China or the Hong Kong protesters suffered backlash from both US and China. A swine flu also took out a large supply of pork in China and prices of pork shot up, causing woes to personal finance of the common folks in China, who has been squeezed by both the trade war and the swine flu. 

With both US and China's leader facing various crisis back at home, they may be looking to ease up on the trade war in order to ease some scrutiny on the political front. There is a small breakthrough in the US China trade war as negotiator claims that they are close to an interim trade deal which will ease some of the tariffs and sanctions in place. The proposed 15th Oct tariffs on China goods are also postponed while the Chinese promised to start buying US agricultural goods again. The positive news gave some stability to the stock market while investors to monitor if a long term trade deal can be established over the longer period of time. 

Portfolio Strategy

The portfolio had a mixed return with the cash component returning 0.4% and CPF-OA returning -0.72% in the month of September. The biggest divergence between cash and OA is due to the performance of Infinity US 500 Stock Index and FTIF - Franklin US Opportunities fund. The difference arises is due to a stronger focus on smaller and tech companies by FTIF and these sectors did not perform well during the month of September. 

Otherwise, the market is relative calm for now and the positive development on the trade war and Brexit end will probably stabilize the market for the immediate period of time. We will maintain a close look out on any possible quick deterioration of global economic data and will adjust the portfolio should the need arise.