Trade and Trade War

Q2 Market Commentary: Trade and Trade War

“No nation was ever ruined by trade…” – Benjamin Franklin

Trade and Global Economy

The foundation of the global economy is free market capitalism.  More people around the globe have been lifted out of poverty by capitalism then socialism, communism and every other “ism” combined. We find ourselves in the uncomfortable position between saber rattling and an all out global trade war.

Trade Wars: Good News and Bad News

When I was a child my mother often reminded me  “what goes around comes around.”  That truth seems to play out daily with threats and tariffs being imposed by President Trump and Chinese President Xi Jinping.  At times, it is almost comical.   In the end it could get messy with producers, workers and global growth as front line victims.

Trade wars fill financial markets with uncertainty, anxiety and volatility.  Above all, markets loathe uncertainty.

To say Donald Trump injects uncertainty into global markets is a mild understatement.  Only time will tell how his tactics and strategies will play out.   A vocal chorus of US Economists predict a messy ending should the war of words ignite into an all out global trade war.

But, there is good news and lots of it amidst the key data for Q2.  GDP Growth kept clipping along at 2.8%, the S&P 500 edged slightly higher and US Small Cap Stocks surged upward more than at 8%.

On the “not so good news front,” non-US stocks along with US Bonds experienced negative returns with Emerging Markets declining almost 8%.

Global diversification often carries a cost over the short term with long-term benefits taking years.  Smart investors have a long term plan and stick to it.

What Now?

On the whole, the good news continues to outweigh the bad in 2018, even as the Fed continues increasing interest rates.  The US economy keeps chugging along; unemployment remains low while wages and inflation are tame at the moment.

As we often say, investing is a marathon and not a sprint.

Win the marathon, stay disciplined and focus on your goals, not your TV.

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