Displaying items by tag: trade war

(Hong Kong)

Hong Kong has erupted into full scale riots with over 1m people taking to the streets. Protesters are angry over a new measure that would allow mainland China to extradite accused criminals from Hong Kong to their courts, a measure which many in Hong Kong say is a clear violation of China’s agreement to leave Hong Kong’s freedoms in place for 50 years. The US has condemned the measure in serious terms, but the reality is that Hong Kong’s fate, and the US’ protection of the city-state, may become a pawn in the trade war, with the US government using it as an element to help it get a better deal.

FINSUM: This seems like one more way for Beijing to exert control on Hong Kong, and we dislike it as much as the protesters on the street. There has been a furious international backlash to the proposal, but it remains to be seen how it may impact the trade war. One more thing we think is important to note: there are 85,000 Americans living in Hong Kong.

(New York)

The whole market is freaking out about the trade war. Between the yield curve inversion, plunging yields, and weakening economic indicators, investors are on bear market and recession watch. However, these worries are likely overdone, meaning the current market is a buying opportunity. There is little consensus that economic data is worsening and the economy is headed for a recession, but investors seemed compelled to believe this because the expansion is about to become the longest on record.

FINSUM: Investors seem to be feeling a sense of doom that has little basis in reality. There is no reason why the economy has to go south just because the expansion has reached a decade.

(New York)

There has been a lot of media coverage lately about how to protect one’s portfolio from the trade war. We came across an unusually clever idea recently, however, that has nothing to do with trying to forecasting the impact of tariffs on different sectors. Here is the strategy: buy exchange stocks (meaning the stock of stock exchanges, like the Nasdaq). The argument is that panicked buying and selling alongside a trade war will boost trading volumes, which in turn boosts revenue.

FINSUM: We think this is a brilliant strategy. If volatility rises, exchange stocks will likely do well. If volatility is down, meaning less trading volume, the rest of your portfolio is likely to be doing well.

(New York)

Everyone is trying to figure out how to protect their own and clients’ portfolios from a trade war. “Which sectors will be the hardest hit”, “and by how much” are common questions. Well, a small Virginia based ETF provider has just come to the market with a new fund that is designed to protect investors from that very issue. The new ETF, TWAR, is designed to track 120 companies who are likely to outperform the market during a trade war because of “government patronage”, or special contracts or subsidies which insulate them.

FINSUM: There is some skepticism in the market about this approach, but it does stand to reason that companies who are less exposed to global trade will suffer less than the market.

(Washington)

Investors have been unsure of how the Fed would handle the trade war. Recent minutes from the Fed showed no indication that the central bank was thinking of cutting rates even though the market expects it. However, the silence has finally been broken as Fed chairman Powell announced yesterday that the trade war is on the list of the Fed’s concerns and that the central bank would act to protect the economy from its fallout. In his own words, Powell said the Fed would “act as appropriate to sustain the expansion”.

FINSUM: We took this as a pretty strong affirmation that the Fed is watching the trade war situation closely and is ready to act. Markets liked it.