Even an unusual Trump-Powell meeting can’t spook investors right now

You’d think that Monday’s surprise meeting between Federal Reserve Chairman Jerome Powell and President Donald Trump might leave investors feeling shaken.

After all, it’s the first time the president and the nation’s top monetary policymaker have had such a meeting since an informal dinner last February. And Trump has routinely attacked Powell since then, pressuring him to cut interest rates. His tweets have been shown to move markets.

But though the dollar initially dropped —Trump tweeted that the “very good & cordial meeting” included a discussion of “dollar strength & its effect on manufacturing” — the currency has since bounced back, and US stocks are on track for another day of record highs. Where’s the worry?

First, the Fed explicitly said that Powell refrained from discussing what policymakers planned to do at upcoming meetings, distancing itself from any suggestion of political interference, per my CNN Business colleague Donna Borak.

It’s also getting harder to puncture optimism among traders that the United States and China are getting close to a “phase one” trade deal that could include some tariff relief, despite some anxiety coming out of Beijing. News that the Trump administration has once again extended a waiver allowing American companies to sell components to Huawei could be read as a goodwill gesture.

Goldman Sachs, which believes tariffs have probably peaked, said in a note this week that it expects the global economic impact of the trade war to ease next year.

“Barring another round of major escalation, we expect the negative effect of the trade war on both US and China real GDP growth to gradually fade in 2020,” chief economist Jan Hatzius and colleagues wrote in a note.

Of course, some skeptics remain. Here’s Simona Gambarini from Capital Economics: “Optimism about trade has been a factor behind the rally in global equities in the past month. But with a ‘mini-deal’ now largely discounted in the markets, and economic growth unlikely to do better than stagnate over the next couple of years, we suspect that any further upside for stock prices will be limited.”