Stock market's record highs may put less pressure on Trump to strike trade deal: strategist

Scott Gamm

The stock market has reached record highs over the past several weeks on hopes of a trade deal between the U.S. and China. 

The optimism even pushed the Dow Jones Industrial Average (^DJI) over the key psychological level of 28,000 back on Nov. 15. 

But the stock surge could put less pressure on President Trump to strike a trade deal, according to one expert. 

“I’m generally optimistic about a trade deal but the markets are at an all-time high, and when that happens Trump has a tendency to take advantage of that to try to use it as a leverage point,” said John Maier, chief investment officer at Global X. “That’s a little concerning to me in terms of a trade deal.”

Trump even referenced Monday’s latest stock market record in a tweet, saying: “Another new Stock Market Record. Enjoy!”

“[Trump] ties himself to the stock market,” Maier said. “When the stock market is at a record high, that’s a leverage point - I have more leeway to negotiate with China.”

U.S. President Donald Trump meets with China's President Xi Jinping at the start of their bilateral meeting at the G20 leaders summit in Osaka, Japan, June 29, 2019. REUTERS/Kevin Lamarque TPX IMAGES OF THE DAY

Stock market reaction to trade deal

Should the U.S. and China reach the Phase 1 trade deal that has reportedly been brewing for weeks, Maier expects the stock market to react positively.

“I don’t know if it’s 2-8%, but I expect a pop [in stocks] before the end of the year if there is some sort of skinny deal with China,” he added.

As the market digests this trade uncertainty and optimism, Maier is focused on “high quality stocks with good cash flows,” especially in this low interest rate environment.

“There’s this tremendous need for income - there’s also some need for growth,” he said. “I expect that you’ll see a lot of value-oriented investors out there.”

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

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