Apr 22, 2025

I recently learned about China President Xi Jinping’s Southeast Asia tour, focusing on “neighborhood diplomacy” with visits to Cambodia, Malaysia, and Vietnam. Despite addressing U.S. “law of the jungle” and “tariff abuse,” the tour resulted in tangible cooperation agreements, including the Laos-China railway expansion and Indonesia two-plus-two dialogue. Collaboration with Japan, South Korea, and Vietnam during Xi’s visit highlighted engagement with regional powers.

Over 100 agreements were signed during Xi’s tour, building on past collaborations. Noteworthy gains included diplomatic and defense dialogues with Malaysia and the launch of a railway cooperation mechanism with Vietnam. The visit hinted at future engagement points for China in Southeast Asia, such as chairing key forums and cooperation frameworks.

The news is concerning for investors as the S&P 500 is down 10% in 2025 due to fears of President Trump’s tariff plan potentially causing a recession. Many Wall Street forecasters, like Yardeni, have turned bearish on stocks, with Yardeni lowering his S&P 500 target twice this year. There is hope for tariff deals, but investors may face increased volatility in bonds and stocks.

Yardeni highlighted the increased chance of a recession, rising to 56% from 20% in January, with a 45% chance of stagflation or recession. Despite the negativity, Yardeni believes that writing off 2025 as a disaster for stocks could be a costly mistake if positive signs emerge sooner rather than later. Additionally, Evercore ISI strategists suggested cautious optimism on stocks, emphasizing small caps’ vulnerability and options plays on the iShares Russell 2000 ETF.

In other news, China threatened retaliation against countries making trade deals with the U.S. to its detriment, Trump listed “non-tariff cheating” on Truth Social, and Tesla stock fell ahead of earnings. Capital One Financial’s $35.3 billion bid for Discover Financial Services was approved, while economic indicators suggest a potential U.S. economic slump. Chicago Federal Reserve President Austan Goolsbee warned of upcoming economic challenges, and the passing of Pope Francis at 88 marked a significant loss.

Stay Well!