Displaying items by tag: trade war

Thursday, 12 September 2019 12:00

A US-China Trade Deal Looks Likely

(Beijing)

The US and China might be starting to realize that they really need each other. Each side is feeling the pain, and that is making a deal feel closer. China has seen a 47% rise in pork prices in the last year—a key form of disturbance to its population, and seems to want to resume importing US pork. Trump has just delayed a new round of tariffs as a measure of good faith before Washington and Beijing return to the negotiating table.


FINSUM: It is quite hard to ascertain the degree to which the US and China actually want to close a trade deal. China has grown so large and self-sufficient that it is big enough to get by on its own, which seems to lower its incentive to compromise. The US is in the same position.

Published in Politics

(Washington)

So one thing is very obvious about Trump’s tweets—they can move markets. However, what is less well-known is that their frequency also has an effect on indexes. So how do markets fare on days when Trump is hammering out tweet after tweet versus days when he only pens a few? The answer is that more is worse. On days where Trump write 35 tweets or more there is a 9 basis point drag on markets versus days where he tweets 5 times or less, where there is a 5 basis point tailwind.


FINSUM: There is not much one can do with this info, but it is an interesting data point. How long before a new “smart beta” product comes out focused on this? Haha.

Published in Politics
Friday, 16 August 2019 12:24

This Market Can Only End in Tears

(New York)

Bloomberg has published a very insightful article about the current state of the market. In particular, it offers a view of how the big run up in bonds is likely to end. The fears that are driving the bond market—mostly that de-globalization will cause a recession—can only end two ways. Either the recession and de-globalization never materialize, in which case yields shoot back up, causing big losses in bonds. Or, the breakdown of global trade does happen, In this scenario, goods likely become significantly more expensive (especially in west) because there is no more labor and cost arbitrage. In this scenario, inflation then jumps, again sending yields much higher and sparking losses. In other words, the current bond market can only end in tears.


FINSUM: This was a very insightful argument in Bloomberg today. While there are some nuances that might cause some different outcomes, the basic contention is quite astute. Stocks seems a much better bet.

Published in Bonds: Total Market
Wednesday, 14 August 2019 13:08

Big Tech to Suffer from Trade War

(San Francisco)

Bad news for tech investors and Silicon Valley executives—it looks like Big Tech is going to bear the brunt of the trade war. The group of stocks surged yesterday on the announcement of the delay of tariffs on China. This is because a major part of the tariffs relates to hardware that is core to technology companies’ products. Most specifically, the Treasury said it would delay tariffs until December 15th on “cellphones, laptop computers, videogame consoles, certain toys, computer monitors, and certain items of footwear and clothing”.


FINSUM: While this development offers some relief, it will likely be fleeting. The trade war with China is looking increasingly intractable and tech is right in the middle of it.

Published in Eq: Tech
Wednesday, 07 August 2019 09:48

A Recession is Now a Major Threat

(New York)

Markets have indigestion this week, but is a recession any more of a threat than it was a couple weeks ago? The answer is yes. So far the manufacturing side of the economy has been the weaker one, with the consumer side staying strong. However, all the tariffs that have been imposed on China will now hit the side of the US economy that is strongest—the consumer—by raising prices at the register. Therefore, the trade war will directly weaken the best part of the economy, which could seriously curtail growth.


FINSUM: To protect against this, investors may want think about shifting into defensive shares like consumer staples, healthcare, utilities, and real estate, all of which tend to outperform cyclicals in a down economy/market.

Published in Eq: Total Market
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