Markets found a temporary bottom on hopes of likely trade deals with China, India: Peter Cardillo

Peter Cardillo, Chief Market Economist, Spartan Capital Securities, says trade negotiations are showing movement, particularly with China, as the Trump administration seemingly backtracks on demands, increasing the likelihood of an initial deal to diminish tariff fears. India is expected to make a deal with the United States, further alleviating concerns about India aligning with China.

It seems a US versus China story is playing out and what is going to come out of those negotiations whenever they start; but till then, the equity markets seem to be holding out quite steady. What do you think is fuelling this move?
Peter Cardillo: We may have found a temporary bottom here and the reason I say that is because earnings are beginning to show that for the most part, they have beaten market expectations. Of course, guidance has basically been pulled back and there are a lot of uncertainties and that is all due to the trade war and for now, the market has found a bottom and we saw that with the Alphabet earnings where the market really was taken by surprise.

There have been other companies as well and so it is safe to say that for now investors are likely to focus on the big name companies that will be pouring in next week and in terms of the indices, we can probably rise another 1.5-2% from present levels and we are also beginning to see some movement between trade negotiations and, of course, the key remains China. But I am pretty sure that with the Trump administration showing signs of beginning to back track on some of their demands, we will probably get a deal, at least an initial deal and that should diminish the fear factors regarding tariffs.

Just yesterday we saw all the tech majors rebounding sharply and still the index is still down almost 14% from its highs. Do you believe the rally will be led by the tech counters and is that the space to watch out for?
Peter Cardillo: We will get a glimpse of the PCE this coming week and we will also get a glimpse of GDP and speaking about GDP, I am looking for a pretty big contrast compared to Q4 of 2024 and that would imply that we probably either are moving into a short-term light recession or perhaps we are already in one. But the key will be with inflation numbers, and we will get a glimpse of the PCE which I expected to be lower and if there is some sort of an agreement between China and some of the key trading partners with the United States, then there is a good chance that the Fed will likely lower rates in June.

Given the way the global scenario is now shifting day in and day out with the commentaries that you are getting in, one day it is positive, and the next day backtracking on these comments. But how shall one play the theme? Do you think that now EM is the place to be in and amongst EMs, when do you think you will have FII liking India versus China?
Peter Cardillo: Well, if I heard correctly the question, India will make a deal with the United States and I believe that, there will be some sort of a deal with China as well. Now, of course, the backtracking changes from one day to another, but in essence it is the markets that continue to dictate to Washington and to the other countries that the trade war must be avoided and deals must be made. India will probably be one of the first countries to make a deal and that should alleviate the fear that perhaps India is going to look at China as opposed to the United States.