As for trade, President Trump tweeted some encouraging developments over the weekend, though it’s unclear how much progress is being made. There is a March 1 deadline on a trade deal, or Trump has said he would resume putting tariffs on China.
if we were to reach a lasting fair and equitable peace on the trade war front that would be good news,” said Keon, noting it would be a positive catalyst for the market.
“It’s such a wild card,” said Golub.
But there is skepticism around a deal being made in time to head off further tariffs. Goldman Sachs economists, for instance, lowered their growth forecasts to 2 percent for the first half of the year, and noted that more tariffs are likely.
“I think the market needs to come to an understanding that this thing is going to take some time.,” said Golub. “In the short term it isn’t the best thing. If we get this right and the long term trade relationship between teh U.S. and China is in a bettter place that’ not a bad thing for markets.”
Golub said he’s not concerned about slower earnings growth at this point, after 2018’s more than 20 percent growth.
“The fact you’re comparing it to this year’s stellar earnings growth, juiced by tax changes is not a fair comparison. The growth will be slower, but it’s not going to be a problem,” he said. “I would expect managements are going to be very hedged and cautious in their language when upcoming reports come out. I think there’s going to be a disparity between the numbers that are going to be just fine and rhetoric which is going to be cautious.To the extent the market will get caught up in the rhetoric, it will create a buying opportunity.”
With expectations for slower economic reports, data will also become more important to the market, including reports like Friday’s jobs report. Economists expect growth to slide below 2 percent in the second half of the year, but they do not expect a recession.
So far, the shutdown of the government has added to negative sentiment but it is not seen as a big factor for the economy or markets.
Another positive has been the decline in Treasury yields which have fallen as stocks sold off. Yields move opposite price.
The 10-year yield, which influences mortgages and other loans, has fallen below 2.70 percent, after trading as high as 3.25 percent this year.