While I will let the “real” analysts debate about how we should handle our trade deal regarding China, I am only here to discuss the sentiment around the China deal.

This past week, I have seen many posts like this one:

“We wouldn't be down at these relatively low levels had China settled with Trump. Guaranteed.”

The posters’ logic works like this: The market has been dropping ever since the China deal fell apart. So, it is clear that the cause of the drop is the China deal debacle. And I am quite certain that almost all of you think in this exact same way. I mean it so logical, right?

Well, it sounds logical only if you ignore facts that blow this logic out of the water. Consider that the S&P500 rallied 9% in 2018 during the heart of the trade war with China. With each escalation, we saw the markets continue higher and higher. How could that even be possible based upon the “logic” everyone seems to espouse today?

Now, I am quite certain there will be some of you that will try to explain away this clear lack of consistency. And, you would likely be those with the best blinders in the room. But, how can a person who is viewing the market through the lens of intellectual honesty come to such a conclusion?

If the China trade war clearly causes declines in the market, then this would be true all the time. And, the fact that we saw a 9% rally (which, at the time, had many scratching their heads) should make everyone question the basis for such an assumption.

Back in 1940, Ralph Nelson Elliott noted the following about causation for market moves:

The causes of these cyclical changes seem clearly to have their origin in the immutable natural law that governs all things, including the various moods of human behavior. Causes, therefore, tend to become relatively unimportant in the long term progress of the cycle. This fundamental law cannot be subverted or set aside by statutes or restrictions. Current news and political developments are of only incidental importance, soon forgotten; their presumed influence on market trends is not as weighty as is commonly believed.