Fears of a major trade war are causing another selloff in global markets this week. China, late on Sunday, said it would increase tariffs on 128 U.S. products in response to U.S. duties on imports of aluminum and steel. President Donald Trump is separately preparing to impose tariffs of more than $50 billion, especially targeting Chinese technology products in recognition of its piracy of technological intellectual property for years.
Since Global GDP is about $75 trillion, a $50 billion increase in tariffs is a gnat on the global elephant’s rump. A full-blown trade war is highly unlikely – we think this is all part of getting everyone to negotiate. However, we do not trust political leaders, ours or any others, to be wise just because they should be. These developments threaten to end the bull market we’ve been experiencing for the past nine years.
We believe indices are very close to a pivot point, and the coming days will tell us a lot about the near future of the markets. In our opinion, the situation looks good for this to be a firm triple-bottom pattern that leads to the next bullish move upward. But if those indices violate key indicator levels we use, we will be selling positions to protect our clients’ balances from more potential losses.
We believe that as a whole the fundamentals that have driven this bull market are still very strong. Revenues and profits are up, employment is up, taxes are down – the consumer and business outlook is positive. But investor emotions can change quickly. Because of that we are always ready to deal with irrational fears as well as irrational optimism.
We will provide updates of our market opinions in future columns as conditions change. But if you have comments or questions about details concerning the financial markets or strategies to protect investments in times of uncertainty like this, email us at firstname.lastname@example.org.
Ron Finke is president of Stewardship Capital in Independence. He is a registered investment adviser. Reach him at email@example.com.