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The Chinese economy is a bigger worry right now than the U.S. economy, according to an investments expert at a private bank.
Speaking to CNBC on Friday, Felix Brill, the head of investment solutions at Liechtenstein-based VP Bank, said investors should expect more market volatility due to the ongoing trade war negotiations between Washington and Beijing. Still, he ultimately expressed optimism that China’s leaders will keep their economy together.
“The Chinese economy is, at the moment, a bigger cause of concern right now compared to the U.S. economy,” Brill told CNBC’s “Squawk Box.”
He added that there are “clear signs” that China’s economy is slowing in the short term, and there may be more dragging on the nation as it looks to transition its economic model from one led by exportation to a more consumption-driven approach. Adding the tariff battle between the two largest economies just means growth will be “a bit more difficult” for Beijing, he noted.
But, Brill said, that doesn’t mean China won’t be able to push through those challenges.
“This is some cause for concern in the short term, but I’m confident that the Chinese authorities, again, will step in and implement additional measures to support the economy,” he said.
As for how markets will react to the continued trade war gyrations, Brill said to expect more “swings.”
Washington and Beijing are careening toward the March conclusion of a 90-day agreement not to implement new tariffs on each other, but analysts have seen some positive signs out of this week’s three-day round of talks in Beijing.
That won’t be enough, though, and there are still some thorny issues left to iron out, Brill said.
“The market sentiment will be very much dependent on what’s going on in the trade talks,” he said. “We’ve seen some progress this week, some good news, but it was just a start. I think there (are) still some obstacles along the way and we’re far away from really a solution.”
“So this is going to weigh from time to time on markets — but in case we see progress, it can always be also relief for markets and spur some good market movements,” he added.
Overall, Brill said he was taking a neutral stand on stocks. Last month’s declines corrected some of the excesses in valuations, he said, but there were still significant risks — including the ongoing U.S. government shutdown — on the horizon.
“For us it’s too early to go really strong into the markets already now … because we have still some severe uncertainties weighing on markets: The economic outlook is clouded by quite a bit of uncertainty — with the shutdown, not only the trade talks,” he said. “So, it very much depends what the next couple of weeks will bring.”
