Why this top strategist is a 'bear’ on Trump's China trade talks

Scott Gamm

Stocks rose Tuesday thanks to media reports suggesting in-person U.S.-China trade talks are set to resume as soon as next week.

But that’s not changing the trade outlook for Kristina Hooper, Invesco’s chief global market strategist.

“I continue to be a bear on trade negotiations,” she told Yahoo Finance in an interview on the floor of the New York Stock Exchange. “I know that we are scheduled to have face-to-face talks on China — that’s the new news and that’s certainly propelling markets higher, but we are a long way away from a trade deal.”

The news sent the S&P 500 (^GSPC) above 3,000 Tuesday for the first time since last Friday and pushed the index to its first close above 3,000 since July 16.

Hooper doesn’t see much of a reason for China to acquiesce to U.S. trade demands.

“There’s a mile-wide divide between what the United States wants and what China wants and I still see no compelling reason why China would make any major concessions to the U.S., especially as we get closer and closer to the 2020 election,” she said.

Hooper said President Xi, who doesn’t have presidential term limits, can roll the dice and hope to get more favorable terms from a different U.S. administration starting in 2020.

Stock market outlook

Even with the uncertainty surrounding trade, Hooper said the bias is towards risk assets, given the Federal Reserve’s dovishness lately. The central bank has hinted at a cut to short-term interest rates, perhaps as soon as later this month.

“We want to have exposure to risk assets,” Hooper noted, referencing the technology sector specifically.

She said most companies, including the FANG names (an acronym for mega-cap technology stocks like Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL)), should be able to beat their earnings estimates, given how estimates have been coming down in recent weeks.

Facebook and Amazon report earnings this week, while Apple reports next week. Netflix beat earnings estimates last week, but the stock plunged on weaker than expected subscriber growth.

“[The low earnings bar] is absolutely good for stocks,” she noted.

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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