Investing.com -- Yardeni Research has cautioned investors not to expect a major breakthrough when President Trump meets Chinese President Xi Jinping on Thursday, though it said modest progress would still be welcome.

The firm, in a note on Tuesday, called the Washington summit "arguably the most consequential encounter of either man's presidency," but said a "grand bargain" on trade, semiconductors, currency, AI or Taiwan is unlikely after 17 months of escalating tensions.

Even so, it said, "even a modest stabilization of ties and an extension of an increasingly fragile commercial ceasefire would qualify as a victory for global markets."

Yardeni sees room for progress on extending the trade truce, which expires Nov. 10, alongside commercial deals such as Chinese purchases of U.S. soybeans, Boeing jets and John Deere equipment, tentative AI guardrails, fentanyl cooperation, rare-earth access and yuan stability.

Harder issues are likely to prove intractable, the firm said, including Taiwan, Chinese electric vehicles, the Middle East and, above all, AI dominance.

It cited Trump's line that "Whoever wins AI wins," arguing neither side will cede leadership even if they agree to keep talking.

Yardeni believes both leaders arrive weakened, with Trump’s low approval and oil-driven inflation ahead of November's midterms, and Xi due to a property crisis and deflation.

It added that markets have largely priced in no deal, with the China MSCI down 12.7% this year, versus gains of 84.9% for Korea and 68.3% for Taiwan. It continues to favor emerging markets excluding China.