This Saturday evening, Donald Trump and Xi Jinping will sit down to dinner in Buenos Aires at the G-20 conference. Investors are holding their breath, hoping that the two might come to some agreement that could lower tensions and avert a full-out trade war between the U.S. and China.

 

Given past rhetoric and the president's mercurial temperament, anything could happen. Xi Jinping and his advisors, after years of dealing with Washington, believe if they just hang tough and wait Trump out, the outcome will be "business as usual" on their terms.

 

Unfortunately, Wall Street and the media have created another binary event out of the dinner. Either there is a breakthrough, in which case the markets roar higher, or there is no deal and stocks fall back to the lows and maybe break them. I wish it were that easy.

 

The trade relations between our two countries are complicated. I mean really complicated and no single dinner or event is going to solve it. A new economic relationship with China will take months, even years, and require talks on many fronts. Tariffs are just one small issue in these talks, although the president uses that issue constantly in his tweets and rallies.

 

Whether he is truly that naïve (a possibility) or is just using a dumb-down approach for the benefit of his political base, is unknown. His rhetoric on many other issues (immigrants, the wall, jobs, the media, Mueller, etc.) indicates that he believes his audience has little understanding and even less patience on the issues that beset us than he does.

 

Clearly, the president has had a "bad hair day" on several fronts this week. GM's announced layoff of 14,000 U.S. workers and the closing of several factories damage his MAGA claims of bringing high-paid jobs back home. Mueller's investigation looms closer and new revelations on his Russian dealings during the presidential campaign have surfaced. And then there is the stock market's decline, which the president believes is his true opinion poll. Something positive out of this weekend might distract the public from these negative developments.   

 

If we consider his "new" North American trade agreement signed this week in Argentina as a template, there is a chance that Trump could claim another trade victory on the China front. Most readers have realized by now that only marginal changes were made in this updated Mexico, U.S., Canada trade pact.

 

He could use this same kind of sleight of hand in negotiations with China. We know, for example, that the Chinese have already offered a number of concessions to the U.S. on trade, although the administration has not been forthcoming in revealing the details. It would be easy (as it was with Mexico and Canada) to claim victory by simply accepting superficial changes to an existing trade pact. 

 

As for this weekend, if I were passing the gravy, I would agree to a joint statement with Xi after dinner that indicates "progress." Some nebulous statement from Xi, such an increase of soybean purchases by China, or postponing the January deadline on tariff increases by the U.S. from "Don, the Con" could give the markets new hope without much content.

 

In the meantime, you may be wondering why the markets turned around this week. Fed Chairman Jerome Powell, in a speech before the Economic Club of New York, announced that interest rates were just below a level where further rate hikes might not be necessary. Investors liked that — a lot. As a result, the S&P 500 Index has gained back some of its losses since Oct. 3. It is now down 6 percent from the beginning of last month, and up slightly for the year.

 

Good news out of Buenos Aires could ignite a Christmas rally and send the Dow up 500-700 points in a short period of time. Bad news might do the opposite. As it stands, November was a positive month for the markets. Stay tuned for the fireworks.