The main question, however, is what the policy response will be. For China, my take is: massive, endless monetary easing.
In the US, yes, Trump is playing to his domestic base, but this can be effective. He is currently enjoying his strongest approval numbers in years, with Gallup showing the president at 46%
, exceeding even President Obama's approval rate at this point in his first term. That said, the position leaves Trump vulnerable as well; with the 2020 vote drawing closer, he cannot and will not continue his aggressive path on this front if the market continues to tank.
The Federal reserve, in our view, will move the rate cut forward/up. We know from the past few years that every time the market corrects by 7-10%, the Fed changes tone and direction.
I don't like current valuations. I don't like the current outlook.
And I'm pretty confident that the market will be supported/bought no matter what the outcome of Friday's trade talks.
The worse the headlines, the larger the policy response.
I suggest buying Nasdaq calls.