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

financial design studio fee only financial advisor deer park Chicago china trade deal tension draft

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.

fee only financial advisor china trade deal stronger emerging markets II draft

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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