The Walkback

Happy Monday everyone. I hope you all had a good weekend!

We got the walk back from Trump that I expected and posted about yesterday in the week ahead preview. After a threatening post on Friday claiming he was putting 100% tariffs on China, he saw the market reaction, calmed down, and had flashbacks to April.

To recap, here’s a summary of his comments:

“Don’t worry about China, it will all be fine. Highly respected Xi just had a bad moment. The USA wants to help China, not hurt it!”

“Xi is a smart man and a great leader. I think we’ll get a deal done, I think we’re going to be fine.”

Treasury Secretary Scott Bessent also chimed in this morning:

”The U.S. is pushing for Peace and China is pushing for war. Trump’s post on Friday turned the tables, China made a strategic miscalculation.

We don’t want to decouple from China but China is sending a decoupling message. Bad things with China don’t have to happen, our relationship is good. More talks to come this week.”

Both the U.S. and China in their current state need each other more than either would like to admit. They’re much better off as partners than not. Could that change in the future? Yes. But as of now, the two depend on each other and would be in big trouble without the resources the other has.

The U.S. depends on China for a lot. Critical minerals, batteries, solar components, and large scale manufacturing capacity that we simply don’t have domestically yet. China controls the supply chain for rare earth elements, graphite, lithium refining, and battery materials. These are all essential for EVs, AI data centers, defense tech, renewable energy, etc.

At the same time, China of course depends heavily on the U.S. for advanced semiconductors, AI chips from companies like Nvidia, software, capital markets, and consumer demand. We’re still one of their largest export markets, and American innovation fuels much of their ecosystem whether directly or indirectly. Both sides need each other. The U.S. can’t build or scale without China’s materials and manufacturing, and China can’t innovate or grow without U.S. technology and spending power. Everyone talks about decoupling but the truth is, they’re still deeply tied together. I do not see a scenario in the near future where the two divorce completely, this would cause major global issues.

In regard to the “new” 11/1 China trade deal deadline, I am not confident we see a deal before then. Another extension seems likely to me, it’s been over 6 months since the U.S. and China started negotiating a trade deal. It does not seem like we’re significantly closer than we were a few months ago. I never expected a deal to be completed quickly, it’s not surprising it’s taking this long.

Why exactly did this “recent” feud start? Rare earth metals. Last Monday I wrote the following:

Since that write up just 5 trading days ago:

MP +36%
USAR +63%
UAMY +112%
CRML +130%

This will continue to be a battleground between the U.S. and China and I don’t expect the newsflow to stop here. That doesn’t mean these stocks can’t pull back, but it does highlight how badly America needs to bring rare earth production back to the U.S. and how much it’s willing to spend to make that happen. China is essentially dangling rare earth metals over America’s head, fully aware of how dependent we still are on their supply chain.

The second hottest theme of the day? Batteries. Another one closely tied to China, and the second theme after rare earths I’ve covered since launching this Substack last week.

An excerpt from yesterday’s look ahead post:

Since that post yesterday afternoon?

ABAT +44%
MVST +22%
QS +16%
AMPX +9%
ENVX +9%

There’s a clear macro theme emerging here. The battleground sectors between America and China are seeing heavy inflows because one thing is clear, America no longer wants to depend on China for critical technologies like rare earths or batteries.

This is exactly the type of big picture thematic, narrative driven trading and investing I focus on. Identifying where the money is flowing, when, and most importantly why.

Shifting over to the broader market and what I’m seeing, plus a new trade I put on today.