Immortality On 9/28?
The biggest issue looming over global financial markets is the ongoing trade war between the U.S., and well, pretty much the rest of the world.
Apparently we have the art-of-the-deal in action with Mexico, although no details have yet surfaced. And still looming largest is our trade tiff with China.
Stocks got a boost last week when it was reported that U.S. trade negotiators suggested new talks with Beijing.
Our tweeter-in-chief did his best to squash these hopes tweeting: “we are under no pressure to make a deal with China, they are under pressure to make a deal with us.”
And so it goes.
The fact is ongoing trade tensions are having a real negative impact on global markets, as you can see in the graph below.
I fear it’s just a matter of time before U.S. stocks get hit harder too.
As you can see, China and other emerging markets are the biggest losers.
But the damage isn’t limited to these markets alone. European stocks, as measured by the Stoxx 600 Index, are down nearly 10%. Japanese stocks (TOPIX) have fallen more than 5%.
Conversely, the S&P 500 is up about 8% year-to-date. But, according to several independent analysts the trade war fallout could get A LOT worse for the U.S.
The Trump administration already threatened its next move saying the U.S. would slap tariffs on all Chinese imports across the board.
This would drive up the cost of everything, from Nike shoes to Victoria’s Secret bras and Apple iPhones, for American consumers.
Like it or not, Americans are hooked on Chinese imports, to the tune of $506 billion worth. Every tariff ends up being an extra tax on you, the U.S. consumer.
Source: U.S. Census, U.S. and Chinese Announcement, Bloomberg
If this happens things could get very ugly, according to a recent report from FactSet.
Analysts at the research firm constructed a “stress-test” of the impacts of an all out U.S.-China trade war. The worst-case scenario isn’t pretty.
A worst-case would mean that Trump has his way, imposing across the board import tariffs on ALL Chinese goods.
In that scenario, FactSet believes U.S. stocks could ultimately nose-dive 20% in value. The strong U.S. dollar could crash 15%-to-20% in value against the euro and yen, respectively.
Currently, investors are largely discounting trade tensions, believing Trump will borrow a page from his own book and strike a deal.
But the risks are high because this is an election year, which means political posturing could stall any agreement.
If the worst case scenario does come to pass, stocks could come crashing down.
Look out below.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch