Throughout Donald J. Trump’s presidential bid, he mentioned many things on an ongoing basis. Building a wall on the Mexican border and bringing back jobs to America were two of his main topics. However, throughout his campaign, he also took time to repeatedly discuss how unfair America’s trade deals with China were.
In an effort to attempt to correct the perceived-unfair trade situation with China, Trump has proposed roughly $100 billion in tariffs on Chinese goods. This could hypothetically earn the US government a significant amount of money and create a more favorable trading situation. However, as a response to Trump’s tariff proposals, China has also proposed a number of tariffs which could cancel out any benefit that Trump’s tariffs could supply.
Effects on the Market
None of the proposed tariffs have become law yet. However, they could do so within just a few months. But even though Trump’s China tariffs will not become law until August, they are currently creating a lot of uncertainty, which is bad for the market. This is because uncertainty makes people hesitate. It makes people afraid to make new business deals, to buy stocks, to take on new international partners, and more.
Hesitation and uncertainty can have a negative impact on the stock market. In fact, the recent stock market dip in the beginning of the year coincided with the release of many of the news stories about potential trade wars that could soon emerge between the US and China.
Does This Mean We Are in for a crash?
In the view of HCR Wealth Advisors, a registered investment advisory firm, no it does not. The tariff situation may have caused a dip in the stock market, however, the market was due for a pullback anyway. New lows have not been made in the past few weeks, even though there is still a lot of uncertainty caused by the talk of trade wars. This is a positive sign for the market and, in fact, it could be a sign that the market is in for an upward push.
HCR Wealth Advisors has also identified a number of other factors which indicate that that the market could be headed upwards again in the near future. For example, corporate profit growth for the rest of this year is projected to be very strong. This is a great sign that the market is healthy. Furthermore, investor skepticism levels are still high, interest rates and inflation appear to be under control, and sentiment in the credit markets is high right now. All of these are promising signs for the stock market.
Another factor that could indicate positive growth for stocks is the fact that the Federal Reserve will most likely only hike short-term interest rates twice this year. This is unlikely to disrupt the market very much in the next six to eight months.
The possible trade war between the US and China has been attracting a lot of attention lately. However, that is just one of many factors that could impact the market for the rest of the year. You should be cautious not let the negative news stories about this topic distract you from all of the other positive factors which could indicate strong market performance for the rest of the year.
HCR Wealth Advisors prides itself on being able to understand market conditions in order to more effective assist its clients. It is the goal of HCR Wealth to help its clients prosper by reacting appropriately to market changes. Right now, the firm believes that the China tariff uncertainty is not going to move the market too far downwards, and that a strong rebound could definitely be just around the corner.
HCR Wealth Advisors is not affiliated with this website.