The right US-China deal may make investors hope that ‘globalization hasn‘t ended‘

Stock markets globally have to some extent recovered from and could move higher if a “positive surprise” comes out of the trade deal between and the , according to financial services company CLSA.

“I think there‘s room for further rally if there‘s a positive surprise on the deal. What‘s the positive surprise? It‘s that they drop the existing tariffs,” Christopher Wood, global equity strategist at CLSA, told CNBC‘s Sri Jegarajah on Thursday.

Wood was referring to the additional tariffs that China and the U.S. imposed on each other‘s products last year when were escalating. slapped new levies on $250 billion worth of Chinese imports, while did the same on $110 billion in American goods.

U.S. President and Chinese President agreed in December to not implement further tariffs while representatives from both sides work to negotiate a deal.

The two countries reaching an agreement and dropping the additional tariffs imposed last year would lead investors “to think that maybe globalization hasn‘t ended,” which would boost sentiment and spur a rally in markets, according to Wood. But that rally would be short-lived if investors began to worry that the U.S. could raise interest rates again, he said.