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January 8, Daily Summary

Summary

US-China trade talk continues, markets are optimistic.

Watch for Bank of Canada's rate announcement tomorrow, probably not a hike.

What do you think of Andrew Yang's 2020 president campaign in the US?

The US-China trade talk entered the second day. Both sides said that the meeting is progressing smoothly. According to US officials, the two countries have decided to postpone the discussion until the third day. Donald Trump also expressed his willingness to settle a trade deal with China to boost the stock market. US stocks opened higher due to the expected progress of trade. The Industrial Sector (Industrial Select Sector SPDR ETF: XLI) gained 1.37%, with Boeing (NYSE: BA) up 3.4% and Caterpillar (NYSE: CAT) up 1.3%. In the Canadian market, TSX was up 0.7%.

Apple (NASDAQ: AAPL) CEO said today that Apple's development system has never been better, and the stock price has risen by 1.91% today. However, its main competitor Samsung said it is affected by the decline of chip demand, and its fourth-quarter profit is expected to fall by 29%.

At the close, gold futures fell 0.29% to $1,286.15, WTI jumped 1.17%, and the US dollar index rose 0.30% to 95.51.

My Take:

The economic slowdown in 2019 is discussed everywhere in the media. Trump’s tax cut extended the growth dramatically. What happened in the last a couple of days cleared the concern of recession to some extent. At the time I am writing to this line (9:15 PM Jan 8th), major Asian markets (including ShangHai) are up about 1 percent again. FTSE, DAX and CAC also climbed higher. We have to continue to watch and progress of trade talk and any information from the Fed and the Bank of Canada. The major event tomorrow would be Bank of Canada interest rate announcement and Monetary Policy Report publishing. Household debt to income ratio has been at the record high. I expect BoC not to raise the overnight rate.

I came across a person named Andrew Yang on Youtube. He is an Asian American running for 2020 president. He is proposing his worldwide one grand per month basic income idea to a couple of mid-west states. The way to fund this ‘Freedom Dividend’ is by imposing a value-added tax to American corporations. Previously, he was a successful tech entrepreneur and deeply understands the impact of automation. Roosevelt Institute studied the idea and projected the program can grow the economy by 2.5 trillion dollars per year and create 4.5 million new jobs. I am not sure whether this idea would work without causing too much inflation. Also, would the right amount of value-added tax enough?