Trade War ‘Cease-Fire’ Still Likely Before Election, BofA Says

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A “cease-fire” is still likely in the U.S.-China trade war with a “very weak” phase one agreed before the 2020 elections, Bank of America head of U.S. economics Michelle Meyer said Tuesday.

Her comments came as Donald Trump said earlier he was willing to wait another year before striking a trade agreement with China.

On the sidelines of a bank press event, Meyer said the trade war was likely to continue after the election, regardless of who wins. There’s consensus about staying tough on China with candidates such as Elizabeth Warren voicing concerns about human rights, Meyer said.

Trade war “tactics” may change, perhaps shifting away from tariffs, if a Democrat were to take the White House. “The trade war has been so damaging because it’s so hard to handicap,” she said. If a more “establishment” Democrat were to win, negotiations may become more predictable, she added.

Earlier Meyer said a “bit more caution” often shows in the economy during an election period. She advised watching for executive actions and trade moves if Congress were to stay split under a Democratic president. “A lot of the policies advocated on the left are unlikely” to get done if Republicans hold the Senate, she said.

Speaking separately at BofA’s event, equity and quant strategist Savita Subramanian said there’s a shift underway from a “trade” war to a tech and national security war. That’s according to recent discussions she’s had with government policy makers in Washington. That war “isn’t about soybeans” and it’s not “going to go away,” even with a “skinny” deal, she said.

Watch: Michelle Meyer of BofA Securities Inc on Bloomberg US TV

That was one reason BofA recently downgraded the tech sector, she noted. She also warned that tech and health care may be “sectors to avoid” as they may come under pressure during the elections. Tech companies face mounting regulations, too, she said.

In November, Subramanian saw the S&P 500 Index ending next year at around 3,300 as trade risk moderates and macro signals show signs of stabilization. Her 10-year target was 5,300. The index ended 0.7% lower on Tuesday at 3,093.

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk

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