The Trade Saga Heats Up
August 31, 2018
The market was drifting lower on Thursday when Bloomberg reported that President Trump was eager to launch up to $200 billion in tariffs on Chinese goods next week. It wasn’t news per se since the end of the comment period happens midweek, but there were enough media hysterics to pressure stocks.
The fact of the matter is that President Trump cannot let up the pressure, although the same report suggested the implementation of tariffs could be in smaller tranches.
It’s not just China. All eyes are also on the Canadian trade minister who has raised her American profile with numerous camera appearances and by feeding the press popsicles to beat the heat. I am just hoping she can deliver a deal to help everyone beat the trade saga heat, as well. It has been in the headlines consistently for six months now.
March 1: The U.S. announces tariffs on Chinese steel and aluminum. The Dow opened at 25,024 and closed at 24,609.
March 22: The U.S. announces 25% tariffs on $50 billion in Chinese goods. The Dow opened at 24,526 and closed the following day at 23,533 – the low point of 2018.
There have been several key dates since, although most have seen benign market reactions.
April 3: The United States Trade Representative (USTR) list of Chinese goods subject to tariffs begins a 60-day comment period.
April 4: China lists 100 U.S. goods worth $50 billion in retaliation.
Ma 21: Nations meet to seek resolution.
May 29: Tariffs on $50 billion worth of Chinese goods advance.
June 18: Dow Jones Transportation (DJT) announces 10% tariffs on an additional $200 billion in Chinese goods.
July 10: USTR lists tariffs on another $200 billion worth of Chinese goods.
August 1: USTR announces tariffs will be 25%, up from 10%.
August 3: China threatens tariffs on $60 billion in U.S. goods.
The United States’ tariffs on $50 billion worth of Chinese goods has now gone into effect, and through it all it’s safe to say that the market has dealt with the tariff saga much better than anyone would admit. The Dow is up more than 900 points since the first salvo and 2,400 from the tariff fear low.
However, it’s also clear that investors want this to go away in order to return their focus to the amazing economic momentum.
Next week the heavy hitters will begin to ferry back from their summer mansions and there will be serious pressure for them to perform through the remainder of the year. I expect this shift to bring about a lot of opportunity, and you can be sure we’re ready and waiting to pounce.
There are two ways to engage in this market. First, chase fundamentals, which is different than chasing stocks. Second, look to buy value. About 20% of the S&P 500 is still in a bear market, and many stocks will come on strong out of the blue. It makes more work to find these names, but the payoff is worth it. And remember, that kind of extra research is exactly what I’m here for.