US-China trade war: Odds of immediate resolution is low - CitiBank

Celestee Tan, Investment specialist at Citibank, explains that Citi analysts continue to see markets as unprepared for the heightened risk of a prolonged economic struggle that could extend beyond China and the US. 

Key Quotes:

“The latest round of US-China conflicts has extended from trade to technology transfer. Technology hardware and semiconductor industry groups of MSCI China index were down 14%-15% since the May 5 bombshell but have not yet reached the magnitude seen in trade tension during 2018.”

“Citi analysts believe that the odds of immediate resolution is low before the G20 meetings in late June. But as the negative impact is felt in financial markets and economies, particularly in US equities, there would be greater incentive to make a deal, possibly later this year. This implies more difficult markets in the coming months before potential respite later.”

“Following the sharp equity rally in 1Q19, while it makes sense to de-risk portfolios ahead of the seasonally weaker summer months and the ongoing volatility, Citi analysts caution against broad-based selling and market timing. In the past two decades, missing just 20 days out of 10 years would have produced negative returns on average for US equities, for what was otherwise the best performing asset class.”