The reality that a tangible and permanent trade deal is necessary for the markets to continue responding to the upside might be settling in as the Dow Jones Industrial Average fell over 100 points on Tuesday.

Yesterday, the capital markets breathed a sigh of relief as U.S. President Donald Trump and Chinese president Xi Jinping agreed to cease fire on their tariff-for-tariff battle, giving the markets hope that a year-end rally could ensue. However, it was back to business as negotiations for an ironclad agreement were underway as communicated through a series of tweets from Trump.

The negotiations with China have already started. Unless extended, they will end 90 days from the date of our wonderful and very warm dinner with President Xi in Argentina. Bob Lighthizer will be working closely with Steve Mnuchin, Larry Kudlow, Wilbur Ross and Peter Navarro…..

— Donald J. Trump (@realDonaldTrump) December 4, 2018

……on seeing whether or not a REAL deal with China is actually possible. If it is, we will get it done. China is supposed to start buying Agricultural product and more immediately. President Xi and I want this deal to happen, and it probably will. But if not remember,……

— Donald J. Trump (@realDonaldTrump) December 4, 2018

….I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN

— Donald J. Trump (@realDonaldTrump) December 4, 2018

The tweets didn’t quell investor fears as markets fretted on the notion that a trade deal can only materialize after lengthy discussions between the two economic superpowers. Furthermore, contentious topics like forced technology transfer and intellectual property could derail negotiations.

Trump and Jinping met at the G-20 Summit in Buenos Aires, putting global markets on pause as the two economic superpowers met to hopefully ameliorate their trade differences. As part of the agreement, both nations agreed to withhold imposing further tariffs on each other for 90 days while they work out a firm, ironclad deal.

The U.S. agreed to keep the current 10% tariffs on over $200 billion worth of Chinese goods while an agreement is negotiated, but will increase to 25% if no agreement is reached prior to the 90-day deadline.

In the meantime, while trade worries crept back into the markets, other realities came to the forefront–namely rising Treasury yields where three-year note exceeded the five-year note on Monday, bringing back the notion of an inverted yield curve signaling a forthcoming economic slowdown.

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