By CCN Markets: The broader stock market is trading in the green today, with the Dow Jones and S&P 500 both moving higher. President Trump tweeted earlier today that the China “talks are continuing,” offering a nod to “great leader” President Xi. Well-known economist Mohamed El-Erian, however, isn’t sold and doubts that any agreement will be reached between the two countries, suggesting on CNBC that the chess game between the leaders is at the point of no return, making it “much harder to get an agreement” and adding:
“So the best we can hope for is not even a truce, it’s a ceasefire. What we saw today is somewhat of a ceasefire.”
— Mohamed A. El-Erian (@elerianm) August 26, 2019
Dow Jones & S&P 500 Volatility to Persist
Despite the whipsaw recovery in the Dow Jones and the S&P 500 today, El-Erian described a perfect storm that is looming comprised of the worsening trade war, lacking fundamentals, and a bond market that is finding no solace in the Federal Reserve’s ability to tame the markets. Chief among the concerns is the trade war, and El-Erian expects that these “ceasefires” like the one that we see today in the stock market will continue, which means nothing but greater volatility ahead that is not likely to subside until the 2020 U.S. elections.
One sure sign that the markets agree with El-Erian’s view that the uncertainty is expected to persist is the rally in the gold market. Gold, which is considered a safe-haven asset during times of uncertainty, is trading at $1,539 an ounce, which is the best level it’s seen since 2013. Gold bull Peter Schiff believes the “air is coming out of this big, fat, ugly [stock market] bubble.” He says the trade war has “distracted investors’ attention from the fact that a weakening U.S. economy is headed for recession.”
The trade war distracts investor's attention from the fact that a weakening U.S. economy is headed for recession for reasons having nothing to do with the trade war. It also provides false optimism that ending the war will avert a recession, or a Trump loss in Nov. It won’t.
— Peter Schiff (@PeterSchiff) August 26, 2019
President Trump has proven that he’s willing to take some punches on the stock market while trading jabs with China, but for now, the ceasefire has provided some welcome relief to the Dow Jones and S&P 500 indices, even if fears resurface sooner than later.