Market Betting on a Trade Deal

The market seems to be changing its attitude towards risk assets given the Fed’s new dovish attitude, China stabilization and improving sentiment about geopolitical risks. This, in turn, has supported an increase in 10-year Treasury yields, which have risen from their 15-month lows to 2.39%. The markets are betting on a trade deal with China in the not-too-distant future as the U.S. trade team heads back to Beijing. And White House economic advisor Kudlow says the U.S. is ready to extend trade talks by weeks, if not months. The extension of trade talks creates a level of uncertainty in the markets that supports a level of volatility.