Can Trump punish China without hurting US economy and his reelection?

Lately, we have been discussing a lot about China, Hong Kong, and the US. Looks like the confrontation will get uglier. Later in the day today, President Trump will hold a press conference on China’s move to control HK.

It is more likely that Trump will be get tougher on China. With an election year and the simmering anger towards China from the US public, the political narrative rallies around who is harder on China. The latest democratic accusation on Trump is that he is not tough enough.

President Xi Jinping is not facing any elections. In fact, he solidified his position as president for life in an almost unanimous approval of the Chinese parliament in a meeting on 11 Mar 2018. He is the most powerful president in China since Mao Zedong.

President Trump must be secretly desiring the same sort of powers President Xi has. In fact, he applauded president Xi’s rise to his new position but later clarified that it was only a joke.

Markets have reacted to it. Though the markets made a new recovery high on good volume yesterday, there has been good selling to keep the market capped. With the weekend, it is more likely participants will be in ‘risk off’ today. As we mentioned yesterday, the critical levels to hold on the downside are in between the 2965 to 2955 in the S&P 500.

Meanwhile, Twitter has invited the wrath of President Trump by fact checking on him. President Trump was quick to sign an executive order to push for legislation to regulate social media platforms. This was long coming and should weigh on the markets too.

The tech giants have become too big, too powerful and in a way dangerous for the economy and society at large.

Paradoxically, given their growth, influence size and maturity, the bigger compliance and regulations that is expected to be imposed on the industry would in turn lessen the chances of another Amazon or Facebook being launched from a garage or a dorm room. So, the positions of the established tech giants will be fortified from being challenged by any new entrants.

It has been reported that in between mid-March to mid-May the personal wealth of Jeff Bezos and Mark Zuckerberg has gone up by $35 billion and $25 billion, respectively. In total, American billionaires’ wealth has risen by a whopping $434 billion during this lockdown so far.

Little wonder, we cannot understand the growing disconnect between Wall Street and Main Street.

Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.