Stocks had a mixed start to the year after finishing 2019 on a strong note.  The S&P 500 was down slightly, about -0.2%, in January as investors reacted to headlines ranging from coronavirus, the impeachment trial, and of course global trade. (YCharts)

The US-China trade war may have been the biggest story for investors last year and we have already seen major developments in the first few weeks of 2020.

• Phase One Trade Deal: The US and China signed the first phase of a trade deal in mid-January after almost two years of negotiations marked by threats and escalating tariffs.  The key elements of the deal are protection of intellectual property, transparency in currency, and a commitment to an increased level of trade ($200B of additional imports by China).  The US will maintain tariffs on two-thirds of Chinese imports and will potentially remove those tariffs when a phase two deal is completed.  (Bloomberg)

• USMCA – The United States-Mexico-Canada Agreement was signed into law by President Trump on January 29^th after passing through the Senate earlier in the month.  The much-anticipated agreement with two of the largest US trade partners is pending ratification by Canada as the Canadian parliament returned to session the last week in January. 

Many investors hope that this progress will reduce uncertainty and boost business spending potentially leading to an extension of the economic cycle.  Only time will tell how these deals hold up and what impact they’ll have on the economy, but these agreements have generally been viewed as positive steps toward reducing trade conflict around the globe. 

Currently, our economic dashboard is showing signs that we are getting later in the economic cycle and while we believe the chances of recession have risen over the next 9-12 months, we don’t feel that a recession is imminent.  One element of our dashboard, sentiment, was recently downgraded as this contrarian indicator showed signs of investors becoming overly optimistic.  While sentiment can change quickly, an overly optimistic sentiment may lead to an increased chance of volatility.  We will continue to monitor this, the current economic environment, and major market moving developments and will be ready to make changes as needed.

Sincerely,

Your Team at TLWM

* Investment advice offered through TLWM, LLC., a registered investment advisor.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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* You cannot invest directly in an index.

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* The put-call ratio is an indicator ratio that provides information about relative trading volumes of an underlying security's put options to its call options. The put-call ratio has long been viewed as an indicator of investor sentiment in the markets, where a large proportion of puts to calls indicates bearish sentiment, and vice versa. (Investopedia)

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