had been down more than 1% before recovering, in the biggest opening gap lower since Jan. 2, according to Bespoke. Much of the 17% gain in the S&P this year has been credited to optimism about trade talks and also an easy Federal Reserve.
Analysts say it is in the interest of both countries to reach a deal, with China's economy just beginning to steady after a campaign of fiscal and monetary stimulus. The U.S. economy has also shown recent signs of improvement, and April's super-strong jobs report gives more credence to the idea that the economy is not near recession, as was believed by many investors earlier in the year.
Like other strategists, Levkovich also points to the fact that the stock market is near an all-time high and that is something that would not be lost on the president. Trump views the stock market as a report card on his administration, so some strategists expect that he would dial back some rhetoric if it was in free fall.
Dan Clifton, Strategas Research's head of policy strategy, said Trump is using the threat of more tariffs to push the negotiators forward towards a deal this week. "If this tactic is successful, the trade deal could be finished in the short run and this volatility would be an opportunity," he noted. Clifton added that it would be difficult to implement the higher tariffs immediately and expanding the list of goods with tariffs would take months to implement.
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