Indices have largely performed well over the past month as investors reacted positively to softer talk from US president Donald Trump towards China.
Equity capital markets bankers have used benign issuance conditions to sell lots of block trades, all of which have largely performed well.
They are now firmly focusing on next year, with one eye on the UK vote on Thursday in case of a shock win for Labour’s Jeremy Corbyn or a hung Parliament.
However, Sunday’s US-China trade talks deadline could cause severe market volatility in the run-up to Christmas.
Investors have been complacent in taking Trump’s talk of progress towards a "phase one" agreement at face value. There is no deal yet between the two countries and there is a strong chance that there will not be one before the weekend. The new measures would impose a 15% tax on $160bn of Chinese goods.
Should the new tariffs be introduced, investors that had largely presumed a preliminary agreement would be struck before the end of the year could sell some holdings.
Given traditional low levels of liquidity at the end of December, the effects on prices of such a move would be exaggerated, as sellers struggle to find buyers for their positions, causing stockmarkets to fall far further than they naturally should.
Of course, the Trump administration could reach a deal with China before Sunday, but investors should not bet on it, or even presume it is in the president’s best interests to do so.
President Trump is fighting to be re-elected in 2020 and needs the support of the industrial states that won him the Oval Office in 2016.
Hostile rhetoric towards China helped him win these votes the first time round and the president could attempt to repeat the trick ahead of next November.