The Great De-Escalation: Another Day, Another Deal

The U.S.-EU deal is the latest boost to bullish sentiment

Highlights

• The U.S.-EU deal is the latest boost to bullish sentiment

• A busy week, with key earnings reports and a Fed meeting

• Valuations outstrip earnings and are now well above historical norms…

• … with the VIX actually below the long-run average

Key Takeaways

• Autos, Energy, Defense Win from EU Deal: Less than a week after the deal with Japan, another trade agreement was made between the U.S. and the EU as the latter was the latest to cave in — but will now face a 15% tariff on most of its American-bound shipments (instead of the threatened 30% levy). The U.S. receives greater penetration to the continent’s energy market (agreement by the EU to import $750 billion), and a commitment for more direct investment inflow (apparently $600 billion worth — reportedly to be aimed at the defense sector). European auto makers, U.S. energy producers, and the defense sector came out the big winners.