Stocks Decline on Trade and Tariffs Concerns
Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 03/03/18. Rates and Economic Calendar Data from Bloomberg as of 03/05/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.
Stocks reversed course last week, dropping across geographic regions as concerns over a potential trade war were ignited by comments and tweets from President Trump. The S&P 500 Index faced the brunt of the selling pressure in the U.S., falling 2%, while the Russell Midcap Index declined 1.7%, and the Russell 2000, a gauge of the Nation’s smallest publically traded companies, lost 1%. On the international front, developed markets fell 2.9% and emerging markets dropped 2.8%. In a sign of a flight to quality, the yield on the 10 year U.S. Treasury note declined 2 basis points from 2.88% to 2.86%.
While nothing has been finalized, President Trump announced his plans to impose stiff tariffs of 25% on imported steel and 10% on imported aluminum. Upon last Thursday’s announcement, the S&P 500 fell 1%, its seventh daily decline of that magnitude or greater so far this year. Selling pressure continued on Friday morning but markets recovered and ended the day with a slight gain, breaking the trend of three consecutive days of losses.
Despite the risks associated with a true trade war, namely a slowdown in global economic growth, investors should continue to base their decisions on facts and not on speculation. At this point, no action has been taken on the part of the Administration to implement tariffs and only vague, potential retaliatory measures have been announced by our trading partners. It is likely that some form of tariffs will ultimately be put in place but against a backdrop of continued positive economic data such as rock bottom jobless claims, a strong manufacturing sector, and a confident consumer, investors should not yet be concerned about the likelihood of a bear market developing over the course of the next twelve months. We are also aware that President Trump’s announced tariffs may only be a negotiating tactic and will continue to monitor pushback on the part of congressional republicans and democrats.
With the seemingly never ending stream of “BREAKING NEWS”, investors need to be very careful to understand and remain focused on their longer term goals. Developing a financial plan that clarifies risk tolerance, income needs, and expenses can go a long way in building confidence with one’s investment strategy. Similarly, engaging with a Financial Advisor can help put the latest news story into context and help better understand the real world implications of what’s being discussed in the media. If you would like to learn more about Hennion & Walsh’s Financial Planning services, or simply to have a portfolio review completed, please do not hesitate to speak with your Hennion & Walsh Financial Advisor.
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.
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