From the Blog

Markets Stumble as Trade War Intensifies

Posted on August 04, 2019

The S&P 500 has declined approximately 5% since President Trump’s tariff announcement on August 1.

The U.S.-China trade war has intensified following President Trump’s announcement on Twitter that he would impose an additional 10% tariff on $300 billion in Chinese goods, effective September 1. In response, China has been less supportive of its currency and let the yuan fall to its lowest value compared to the dollar in more than a decade. Raymond James Chief Economist Scott Brown believes this decline is more of a reduced effort to support the yuan than an active devaluation, as trade tensions would be expected to put downward pressure on China’s currency.

Brown believes this escalation of trade tensions will further slow global growth and increase downside risks to the U.S. economic outlook. For these reasons, he expects the Federal Reserve (Fed) to take action and lower short-term interest rates again in mid-September or late October.

A round of negotiations with Chinese officials is planned in Washington around the time of the implementation date, September 1. Washington Policy Analyst Ed Mills thinks the president could delay the actual implementation to later in the month, leaving more time to forge progress at the negotiating table.

The S&P 500 has declined approximately 5% since last week and President Trump’s announcement on August 1. Michael Gibbs, managing director of Equity Portfolio & Technical Strategy, thinks stocks will remain under pressure as investors move to protect their portfolios until the Fed cuts rates again or we start to see more positive movement in the trade negotiations.

Your advisor will continue to keep an eye on the markets and will share any new developments with you. Please reach out to him or her with any questions you may have.