Yes, the current trade wars are unsettling to markets—should you be worried about long-term impacts?

By Brian Spinelli

Hints of an interest rate cut? Up. Tariff pressures? Down. Volatility? Up. Right now, politics seem to be impacting markets even more than the economic expansion these markets are supposedly tethered to. Some of our clients wonder if it’s time to reduce exposure to stocks.

We all know that President Trump uses tariffs as a negotiating tool for U.S. interests. From unfair trade practices to intellectual property theft to immigration issues, it’s his way of “serving notice” to offending countries. The catch is that every time he launches a new tariff, market anxiety rises.

Should you be worried about your current investment positioning? We don’t think so. This post shares our position.

There’s too much riding on making any kind of deal

Here’s our take: The President sees the stock market as a gauge of his success. If the markets fall for a relatively short period, he doesn’t seem to mind the trade-offs if that means getting his trade agenda accomplished.

BUT. The 2020 presidential elections are looming larger, seemingly by the day. We don’t think Trump will want to contend with an election cycle that’s experiencing a big decline in stock market activity. That’s a big incentive to resolve major trade issues some way or another well before November 2020. The results may be disappointing—or not—but any kind of resolution would give markets the certainty they need to move forward.

Our advice, which may sound cannily familiar: Stay the course. Any resolution, even if far from perfect, would give the markets the assurance of clearer rules to play by.

And enough reassurance to rally. Those who are sitting on the sidelines would most certainly miss out. In terms of the current economic expansion, we believe there’s still some gas in the tank.  If everything gets resolved fairly quickly, you’ll likely see a snap back in market activity.

Of course, we’ll eventually face the consequent dilemma: At what point will the market be overpriced?

That’s a topic for another day.

For more information or questions, please contact Halbert Hargrove at hhteam@halberthargrove.com.

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