'Too much damage has been done': strategist on US-China trade war

The chance of a comprehensive deal between the United States and China to mitigate the ongoing trade war looks unlikely, according to Liz Ann Sonders the chief investment strategist and a senior vice president at Charles Schwab & Co., Inc. (SCHW)

“We're really looking at an environment, I think, where too much damage has been done on the perception of both sides to expect a deal that looks anything like the comprehensive deal that was hoped for even a few months ago,” she told Yahoo Finance’s On the Move.

President Donald Trump tweeted Thursday highlighting the strength of the U.S. economy after Wednesday’s massive market selloff. The Dow Jones Industrial Average (^DJI) closed down 800 points — its worst performance in 2019. It recovered a bit Thursday closing up almost 100 points.

“I don't think it generally ever makes sense to trade around short-term news items.” She warns that the level of uncertainty with regard to the president’s tweets can swing markets in either direction.” said Sonders.

But so can statements from the Chinese. The Chinese government warned Thursday that it “will have to take necessary countermeasures” since the U.S. still intends to impose a 10% tariff on roughly $150 billion worth of imports from China starting September 1.

“The move by the U.S. seriously violated the consensus reached between the two heads of state in Argentina and Osaka, and deviates from the right track of resolving differences through consultation,” The State Council’s Customs Tariff Commission said in a statement:

Sonders’ advice to investors is to beware of the daily statements from both sides “The algorithmic traders have the upper hand on a short-term basis,” she said.

She added that the U.S. economy is still fundamentally strong and “our message to our mostly individual investors in our client base is if anything, lengthen time horizons, because over any reasonably long period of time, ostensibly there's still going to be a connection between prices and fundamentals.”

But economic warning signs are flashing. Sonders points to a deterioration in manufacturing in the U.S., “which is already in recession territory globally.”

She worries the negative news regarding manufacturing could become a self-fulfilling prophecy for consumers worried about a recession “and increasingly looking like that could happen in the U.S. if that actually starts to filter into the hard data, that ultimately affects the consumer.”

Adam Shapiro is co-anchor of Yahoo Finance On the Move.

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