The on-again, off-again trade dispute between the U.S. and China continues to remain front-and-center in the financial press. Chief Investment Officer Jim Lowell discussed how trade negotiations impact the way Adviser Investments positions client portfolios in our recent quarterly webinar*: Tariffs, Trade and Trump.
Please enjoy the excerpt below and click herefor the full webinar replay to hear more.
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The way the market is currently priced, the assumption reflected by where the market is suggests there already has been a deal with China on tariffs*. I think investors may be back into that lull of complacency that somehow something’s going to get done.
Our view has always been that the likelihood, the probability of some sort of optical agreement, is fairly high while the probability for any agreement that has any sort of regulatory teeth—especially as regards intellectual property rights—is probably fairly low.
In terms of how the economy is going to be impacted, if there is no deal with China on tariffs, in other words, if tariffs get ratcheted up we certainly would think that that would be a net negative.
That could be the trigger that would lead us into a recession sometime next year. But that said, it is in both superpowers’ and supereconomies’ political best interests and economic self-interest to be able to get some sort of optical deal done.
With regard to U.S. and China, tariffs are obviously key but China is not the only issue. We have Canada. We have Mexico. We have Japan on the tariff train. Also, China is not just an issue of tariffs—what’s happening in the streets of Hong Kong is beginning to rise to the level of potential market impact and even economic impact with regard to Hong Kong’s economy but it could also have ripple effects into China.
*Webinar recorded after the market closed on July 24, 2019.
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