The stock market sees about an 80% chance that the U.S. reaches a trade deal with China, but those odds decline by the day, longtime stock bull Jeremy Siegel told CNBC on Tuesday.
U.S. stocks are “not far from all-time highs, because there is an expectation in the market that [President Donald] Trump has got to do a trade deal,” the Wharton School finance professor said on “Closing Bell. ” The stock market “has to be higher than it is right now” if Trump wants to get re-elected in 2020.
The market has seen trade developments between the U.S., Canada and Mexico as a positive sign that the United States can work out a trade deal with China, Siegel said. However, the market will become more uncertain “every day and every week” that a China deal doesn’t happen, he added.
“There’s an 80% to 90% expectation right now,” Siegel said.
Stocks closed lower Tuesday as the U.S.-China trade war sparks worries about a possible slowdown in the economy. The Dow has logged five straight weeks of declines, its longest weekly losing streak in eight years. The S&P 500 and Nasdaq have chalked up three straight down weeks.
The world’s two largest economies increased tariffs on one another this month, with the U.S. making the first move by increasing duties on $200 billion worth of Chinese products from 10% to 25%. China announced plans to raise tariff rates on $60 billion in U.S. goods. The tactics amplified a fight that has rattled financial markets and threatened to drag on the global economy.
President Donald Trump said Monday that the U.S. was “not ready” to make a deal with China before adding that he expected one in the future.
Despite the market’s recent declines, there’s still plenty of “solid” long-term value, Siegel said.
