What does the US-China phase one trade deal mean for global equity markets?

[Simon Mugo]

Now that the US and China are ready to sign a phase one trade deal, what is likely to happen to global equity markets after the deal is signed on Wednesday?

[Simon Mugo]

The US-China phase one trade bodes well for global equity markets as the deal is likely to boost global trade and economic growth. However, the deal might have a negative impact on global equities given the latest rally, which was largely based on the expectation that the trade deal would be signed. Therefore, there is a high likelihood that global equity markets might sell-off after the deal is signed in a classic 'buy the rumor, sell the news' scenario.

As a short-term trader, you should be careful not to have very high exposure to the markets on Wednesday and you may be best served taking some profits off the table. Traders with a long-term market outlook may choose to remain in the markets depending on their current profits, but they should also secure some of their profits. The US-China trade deal is long overdue and may be exactly what the global equity markets need to print new all-time highs this year.

The current stock market rally has been in place for almost ten years and many long-term investors are worried that the market might have peaked. However, as traders, we look to profit from short-term swings in the markets, hence, we shall continue to profit from the financial markets this year, despite the market’s overall performance.