Saturday could be a make or break moment for a U.S.-China trade deal as U.S. President Donald Trump and China’s Xi Jinping will meet at the G-20 summit to hopefully iron out their differences on a trade deal that was supposed to happen earlier this year. With the capital markets poised to respond to the upside if a deal is done, is this optimism overblown?

“The rhetoric coming out of China has changed a lot. China is digging in its heels,” said Invesco’s Kristina Hooper, the firm’s chief global market strategist. “So, unless the U.S. is willing to take minor concessions around narrowing the trade deficit, I don’t think we’re going to see a deal.”

However, who needs a trade deal when the U.S. economy can maintain its current growth rate? It’s a question that investors weren’t asking in May when the volatility stricken month sent the capital markets in a daze, but Larry Kudlow, director of the National Economic Council, thinks this is no longer the case.

“The U.S. economy is very strong,” Kudlow told CNBC’s “Power Lunch. ” “I think we’re in very good shape and I think we’ll maintain a 3% growth pace this year.”

“That 3% number is not contingent on a China deal that might not be satisfactory for American economic interests,” Kudlow added. “What has changed is lower tax rates, massive deregulation, opening up the energy sector and various trade reforms.”

Kudlow’s comments come after the U.S. economy added just 75,000 jobs last month, falling below the  expectations of economists polled by Dow Jones who were forecasting a gain of 180,000 jobs. In addition, manufacturing activity in the U.S. grew at its slowest pace last month since October 2016.

Still, this doesn’t faze Kudlow’s view on the strength of the economy.

“I wouldn’t put much stock in one month’s jobs number. There’s lots of other evidence” of a strong economy, Kudlow added.

As the U.S. economy maintains its pace of growth, assuming that Kudlow’s comments come into fruition, investors can look to smart beta options like the Vanguard Value Index Fund ETF Shares (NYSEArca: VTV). VTV seeks to track the performance of a benchmark index that measures the investment return of large-capitalization value stocks.

The fund employs an indexing investment approach designed to track the performance of the CRSP US Large Cap Value Index, a broadly diversified index predominantly made up of value stocks of large U.S. companies. The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

For investors looking for continued upside in U.S. equities over international equities, the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI) offers them the ability to benefit not only from domestic U.S. markets potentially performing well, but from their outperformance compared to international markets.

The fund’s long positions include holdings that helped the S&P 500 and Nasdaq Composite reach highs last week like Apple and Microsoft, which just hit $1 trillion in market capitalization.

Short country positions include Japan, which saw a surprise drop in factory data the same time U.S. equities were doing better than expected in first-quarter earnings.

For more market trends, visit ETF Trends.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.