Market correction may be necessary to avoid a trade war - BofA/ML

Jul. 03, 2018 10:31 AM ETEEM, VWO, SPEM, DEM, SCHE, IEMG, FNDE, GEMBy: Eli Hoffmann, SA News Editor27 Comments
  • July 1 came and went and there is no deal on NAFTA.
  • This missed opportunity, BofA/ML's David Woo says, will have consequences, possibly serious ones, for financial markets.
  • He writes: "If Washington cannot close a relatively easy deal like NAFTA, it is probably safe to assume that it is far from closing a deal with China. This means that the chances for a breakthrough before July 6 (when U.S. tariffs on $34B of Chinese goods and retaliatory Chinese tariffs on U.S. goods both go into effect) are slim."
  • "The market’s willingness to give politicians the benefit of doubt over the past six months might have perversely prolonged the game of chicken. The irony now is that a market correction might be needed to reduce the risk of a trade war. This could be the dynamics of the markets in the weeks to come."
  • Emerging markets, he writes, will get the shortest end of the stick.
  • Top emerging market ETFs by AUM: VWO, IEMG, EEM, SCHE, FNDE, DEM, GEM, SPEM.

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