Trump-Xi Summit: The Investment Playbook After the US-China Détente

SPEAKER_1 (0:01)

This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

Justin Klein (0:16)

Good afternoon, fellow investors, and welcome back to InvestTalk. This is the end of the quarter, September 30th, 2026 The third quarter is behind us now, and a lot to unpack this hour.

A lot of moving parts to the market, a lot of financial news to discuss, and we are here for all of it, but most importantly, we are here for your finance and investment questions. So if you have anything in your mind, don't hesitate to pick up the phone and give us a call during this hour. 88.99 chart is always the number. Now, quick heads up, the date is inching closer, only about three weeks away. Make sure to mark your calendars for October 24th. It's a Saturday, so it's three weeks from this Saturday.

You are invited to join the KPP team and guest experts for our in-person InvestTalk retirement summit. It's free of charge, but space is very limited, so you must pre-register over at investtalk.com. Now, in just a bit, we'll talk about today's Mark performance and run down the show topics for the hour. But as usual, tackle this first caller question now.

SPEAKER_3 (1:23)

Would you comment on XLU, a utilities fund? I'm looking for a conservative stock or ETF that I could hold during retirement that might generate some income. I'll be listening for your answer on the show.

Justin Klein (1:34)

Thanks. Oh, this is a great question. On near-term, obviously, it's not doing well. It's a bond proxy. But this is exactly the type of investment that somebody who's looking for some income is probably going to be very disappointed in, even if the current yields about 3.1%, 3.2%.

It's one of the highest-yielding sectors, might be the highest-yielding sector. I have to go look at that. But it's one of the highest-yielding sectors in the marketplace, in the stock market.

But does that mean it's a good income investment? I would argue, no, not really, because it's not that high of a yield, number one. Number two, it's a sector that has highly capital-intensive. Their cost capital is going up. Their balance sheets are mostly levered. Though growth is very limited, the long-term total return of the sector, I think, lags every other sector. You go back 20, 30 plus years. It doesn't mean you shouldn't own it. It doesn't mean it's not a bad addition, a small sliver, 2, 3, 4 percent of a portfolio. Sure. But as a core holding, no. As a satellite diversifier, sure. But this is not a good way to get income in retirement. There's duration risk here. You see that now. Like I said, it's a bond proxy. So when yields go up, it goes down. We're in a rising rate environment. We're in an inflationary environment. Rates are probably going to go up and maybe have a near term rally. But as an allocation for retirement, for income, it would only be a small diversification sliver and that is it. And in many ways, you want to think of it as a bond like fund. Those better ways to get income than just owning utilities. Now, we had a wonderful show yesterday. We look into this story. The bond market flips to higher for longer. Speaking of that, what that means for every asset class. And I just gave you a little preview, but you can learn more by heading over to wherever you get your podcast and listening to yesterday's show. We also talked about Honeywell. And once again, if you happen to miss it, go check it out. That's the way to get every show is to follow InvestTalk wherever you get your podcast. I have a lot of ground to cover over the next 45 minutes or so and time permitting, we'll get to all of it. Our main focus point today concerns this story. Trump, Xi Summit, we just had it last week. What was the outcome?

And what's the investment playbook for this detente?

About $50 billion in tariff cuts on goods between the US and China.

So what sectors are going to benefit? What asset classes will benefit?

What does it mean for long-term secular trends in the market? We also have other topics on the docket. One is the midterms, where tomorrow is October, which means the midterms are almost officially next month.

I think we're inside five weeks, I believe. What? Five weeks from yesterday? So what can you expect from the market based on history, depending on what outcome we see? Look at that. And then I wanna highlight the bond market. I know it sounds boring, but bonds are actually, if you look at history of bonds, they're a lot more interesting.