Is Global Trade Tension Progress Already Priced In?
by Financial Design Studio, Inc. / February 28, 2019
When investing, people consider what may happen in the future regarding an investment. There are so many things you can think (related to your conviction) about for finally making the investment. Today, an item we need to consider together is whether the global trade tension with China is already priced in.
What does it mean to be priced in?
To be “priced in” means that the results of any trade deal are already factored into the market. If we thought it was already priced in, then there may not be much of a compelling reason to invest now.
Let’s discuss why we think the global trade tension with China is not already priced in to today’s market levels:
If the US does reach some trade agreement with China, we believe there is still upside potential for the market. You can hear Larry Kudlow, the White House economic advisor speak about last week’s progress in these discussions.
Since the trade dispute began, many companies have put plans on hold for investment or growth they were planning. We have seen first quarter earnings for many companies come in weaker than expected. And all for one single reason. We believe the global trade tension progress is not priced in to today’s market prices. Once we hear about any trade disputes being settled, companies can begin to plan. Companies once again can invest in new capital infrastructure projects or new business opportunities that may have been halted because of the trade tension.
The result of companies once again planning with forward moving strategies allows the market to move higher too.
Removing the stumbling block of global trade tension is like the 2018 stumbling block of interest rates.
Now that the Fed has raised interest rates, we can invest without the concerns we had last year. We invite you to review this list of six things going right in the economy from Jim Cramer that allows him to sleep at night.
As talks progress we will keep you informed for any changes we see coming over the horizon. We hope you, too, can sleep well at night with the market’s strong performance year to date.
Wondering how this affects your investments? Schedule a call with Michelle and Steve to discuss your portfolio today.
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