Early this year I suggested that China would stretch out negotiations with the U.S. in an attempt to outlast President Trump. Because President Xi does not have to worry about reelection, he can withstand a slight economic slowdown, especially if there is a foil, enter President Trump. As China moves towards a more consumer led economy, their exporter status becomes less important - though not unimportant. That diminishes U.S. influence - a tradewar is not easy to win.
China has made a point of accumulating grains and fuel this summer ahead of further tariffs. They have continued to import a lot of oil from Iran into storage facilities. Those facilities have avoided U.S. tariffs due to an in between status. Think of it as purgatory for oil imports.
The U.S. can use an attack on Iran as a way to apply more pressure not only to Iran, but to China. By knocking out the IRGC, Iranian navy, nuclear facilities and some oil infrastructure, President Trump can take a "wartime" posture which is usually supportive of reelection and accomplish dual goals. I expect the U.S. to missile /bomb attack China this autumn.
Expect more volatility in markets through the end of next year as the economy slows, profits turn down, buybacks fall and geopolitics play out. Don't forget Brexit.
I put the odds of President Trump winning at about 10%. So, if he does in fact lose, then the end of 2020 could look a lot like the end of 2018, but more severe as the wealthy sell assets with the current capital gains tax rates (as presumably, the Democrats would raise capital gains rates).
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