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The Week Ahead: An Olive Branch on Tariffs, and Maybe a Forever 21 Bankruptcy

The equity markets were mostly up on Friday, following concessions offered by the U.S. and China in their long-standing trade war dispute.

Tariffs: President Donald Trump offered an olive branch this week, stating that he would delay the October tariff increases by two weeks. Following his “good will” offer, China indicated that agricultural products would be excluded from duties imposed on American goods imported into the Asian country.

But what does this really mean for the trade war?

Perhaps not much, even if Trump did say earlier in the week that he would be open to an “interim” trade deal. That’s because both sides have been down this road before, negotiating a resolution of sorts, only to have talks break down. Hard-line positioning followed, usually with another wave of tariff increases, and then an agreement to resume negotiations, again.

One critical fact that could shift the overall agenda this time might be the need to figure out how to hold off implementation of the October and December hikes, if not because of the upcoming holiday selling season then at least due to what another round of tariffs might mean for the economy. While the uncertainty of a trade resolution hurts businesses and their ability to plan for the future, dragging down the economy to the point of a recession has the potential impact of hurting Trump’s re-election prospects.

Consumer Sentiment:  The University of Michigan Consumer Sentiment Survey was released Friday, showing that the early read on the September index rose to 92 from 89.8 last month. The decline in August was the largest monthly decline since December 2012. The September rebound suggests that sentiment could be starting to stabilize, which is in-line with reports that the U.S. and China are in discussions about a restart to trade talks in an effort to resolve their dispute. The Conference Board’s Consumer Confidence Index for September will be reported on Sept. 24.

Bankruptcies: Forever 21 now seems destined to file a Chapter 11 bankruptcy petition, although the big question is when–though it’s likely to happen sooner than later.

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Forever 21 on Thursday disputed reports that it could file as soon as Sunday, noting, “The reports are inaccurate; Forever 21 is not planning to file for bankruptcy on Sunday.” Of course, that only refers to Sunday, and the retailer could still file as early as later in the week.

One thing is clear–a bankruptcy filing is almost a guarantee at this point. The company is said to be working with a claims agent, one of the last hires made before a filing. And with word out in the fashion markets that a filing is at hand, no supplier would be willing to ship inventory and run the risk of becoming a pre-petition creditor. For the teen fast-fashion chain, a filing would ensure that post-petition financing is in place to pay vendors. That’s likely the only way Forever 21 will get inventory for holiday sales. Besides, it needs to file to get out of some very expensive leases and lower overhead costs. Bloomberg reported on Friday that at least 100 doors could get shuttered in a bankruptcy restructuring plan.

Events: London Fashion Week is in full swing and ends on Tuesday. Milan Fashion Week follows on Tuesday night, ending on Sept. 23.