China

I listed on Thursday the main issues I believed have been spooking the markets.  What I believe right now is bothering stocks the most is our seemingly increasing trade tensions with China.  The news of the arrest this weekend of of the CFO of Chinese company Huawei Technologies at the request of the United States on charges seemingly related to illegal exports to Iran cannot be seen as a positive development and we will have to see how it plays out this week and whether it has the capacity to derail current trade negotiations.  Regarding China I believe there are two issues weighing on markets.  The first regards the more immediate issue of resolving our basic trade differences. The longer term problem is an increasing view of China as a rival in the geopolitical sphere.  I hope to return to my longer-term views on China, its opportunities and risks at some point early in 2018.  

The more immediate issue with China revolves around trade.  Here I am of the belief that at some point we will get a deal with the Chinese because it is in their interests as well as ours to come to the table and resolve some of our immediate issues on trade.  I do not expect this issue will be resolved before the end of the year.  As such, while I think that stocks have the ability to tack on 4-5% by the end of 2018. This will likely depend more on headline risk on this trade front and the volatility associated with the past four months is unlikely to subside until such a deal is announced.  

Again I will have more to say about China at a future date.