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China – U.S. Trade Deal = Stronger Emerging Markets?

by Financial Design Studio, Inc. / January 15, 2020

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China – U.S. Trade Deal = Stronger Emerging Markets?

financial advisor robert stoll cfp cfa chief investment officer draft commentary Profile About

Phase 1 of the China-U.S. trade deal is signed this week, easing trade tensions between the two countries. How does this deal impact investment strategy?

Since President Trump took office, the U.S. has imposed tariffs and other trade measures against China and other countries. At times, these moves cast a pall over stock markets, leading to occasional quick selloffs that spooked investors. 

The impact on Emerging Market investing has been profound, as can be seen here below. Since President Trump announced the first tariffs against China in early 2018, Emerging Market stocks (red line) have underperformed U.S. stocks (blue line) by a wide margin.

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The reason why Emerging Market stocks have performed so poorly is because China is a huge driver of activity in other emerging markets. Growth in China drives demand for cement, iron ore, copper, and other commodities that are mined in other parts of the world. As China’s growth rises and falls, so does investor sentiment towards other emerging markets.

Now that trade tensions appear to be simmering, it’s interesting to see that Emerging Market stocks have started to perform better.

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Is this the start of a bullish run in Emerging Markets vs. the U.S.? Time will tell. But it highlights the importance of maintaining a diversified investment portfolio.

Investment strategies change quickly. Do you have an advisor helping you navigate these changing markets? If not, it’s time to reach out to your team of advisors at Financial Design Studio!

Wondering how this affects your future finances? Schedule a call with Financial Design Studio, financial advisors in Deer Park, to discuss your portfolio today.

 

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Financial Design Studio, Inc.

We are financial advisors in Deer Park and Barrington, IL. A team with a passion for helping others design a path to financial success — whatever success means for you. Each of our unique insights fit together to create broad expertise, complete roadmaps, and creative solutions. We have seen the power of having a financial plan, and adjusting that plan to life. The result? Freedom from worrying about the future so you can enjoy today.