As we noted in our last newsletter, the volatility that had returned to the stock market this year has been principally driven by the specter of higher interest rates and a trade war with what seems like the rest of the world. While interest rate concerns are still in the back of investor’s minds, shifting trades policies have become the dominate force in both domestic and international equity markets.
What started off with steel and aluminum tariffs against China has become the potential for tariffs on a wide range of products with some of our largest trading partners – the European Union, Canada and China. These tariffs and the response from other countries has the potential to severely impact GDP in the near-term. Thus, the stock market has become very nervous with each new announcement.
There are several problems with trying to price in the impact of these issues.