Submitted by Taps Coogan on the 5th of March 2019 to The Sounding Line.

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Daniel Lacalle, Chief Economist at Tressis Gestión, recently spoke with CNBC to warn against expectations that a trade deal between the US-China will halt the slowdown in the global economy.

Daniel Lacalle:

“Macro data continues to worsen and continues to be extremely weak and I think that these headlines, like the trade deal or the comments from the different central banks, cannot disguise the fact that the slowdown is evident and due to other factors, not just the trade war… You need to be aware that… multiples have been expanding while earnings and earnings guidance has not improved… Obviously we are here to enjoy a little bit of momentum, that is fantastic, but you have sectors that are up 15% (or) 12% on the year in which earnings growth is expected to be less than single digits, if not flat…”

“The agreement itself (US-China trade agreement) is very likely to be a zero-sum-game…, because for many emerging markets, there is going to be less exports to China because some of that soya, natural gas are going to come from the US now, and there is absolutely no evidence that China is importing less than what it needs. Actually, if there is any evidence, it is of the contrary, because of the rise in inventories… You need to look at: what are the details of this trade deal? Is it really going to make a change? I fear that it is going to be very much about small details here and there but it is not going to change things and definitely not change the trend of global growth, because the reason global growth is slowing down is not because of the trade war. It’s because of debt saturation… (A trade agreement) is good for sentiment that you don’t have too of the largest economies in a trade war. That is obviously a positive and there is always going to be some sort of change in mentality by companies about deciding to make make investment decisions…. But… the trend of slowdown started way before the trade challenges started…”

Nonetheless, liquidity is a powerful thing.

There is more to the interview so enjoy it above.

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