09.06.25 - New optimism on trade talks

The US and China are set to resume trade talks. Negotiators re-meet today in London for a second round of trade and tariff talks.
Before, Trump accused China to violate the trade deal. The talks follow now a phone call last week between Presidents Donald Trump and Xi Jinping.
The talks aim to resolve issues such as rare-earth exports, tariffs, and restrictions on advanced chip technology.

Meanwhile, Chinese exports to the U.S. fell sharply in May, plunging 34.4% year-on-year, the steepest drop since the pandemic lockdown in 2020.
China exports were up 4.8% in May (est. 5.0%) while imports dropped 3.4% (est. -0.9%).

Markets: China up this morning, while US is trading sideways after a positive opening; Commodities are a clear winner with gold, silver, copper, platinum all extended their recent uptrend; the US dollar edges lower;

My view: Investors seem again rather optimistic on US China talks. Any progress remains tentative.

While the US China talks may continue to keep headline risk temporarily down, the underlying strategic competition remains intact, particularly in the race for critical minerals and technological dominance.

I therefore already increased significantly on April 7th the exposure in commodities as well as mining stocks, adding rare earths and later in May gold exposure, all implemented via ETF.
With the current backdrop and the my view that the race for resources continues bring higher prices, I keep the increased tactical allocation in that specific sector.

Any negative outcome of the latest talks could lead to a sharp drop in overall markets and higher volatility. Especially as overall negotiations and trade deals with different countries seem to stuck. Time is running, either reciprocal tariffs are set on hold or would take effect soon. The market is currently pricing in that deals with all nations will be found and tariff issues are going to be solved. I continue to see high level of risk that the market and investors are going to be disappointed as well as negative economic data will be released soon.

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