China
This report analyzes China’s persistent deflation, which is rooted in supply-side forces. Consumption support will be slow and incremental, keeping deflationary pressures elevated for the next 6–12 months.
Investors should modestly underweight equities in their portfolios and look to turn more aggressively defensive once the whites of the recession’s eyes are visible. We think that will happen within the next few months.
This week our three screeners explore equity trades in Robotics, European Quality and Technical, and Hong Kong.
The London Sino-US trade talks offered hope of de-escalation, but Chinese equities remain under pressure from deflationary headwinds and lack a clear macro catalyst to trend higher.
President Trump faces new restrictions on his trade powers coming from the US judicial branch, but they will not prevent him from continuing to restrict trade and investment with China. Rather, they will establish some curbs against entirely arbitrary executive tariffs, especially when wielded against US allies and partners.