Random Thoughts

Trade has dominated the news this week as the Trump administration announced plans to put 10% tariffs on $200 billion of goods from China beginning next Monday, with the rate increasing to 25% on January 1.

China retaliated with $60 billion in tariffs on U.S. goods. Despite this escalation in trade tensions, markets around the globe mostly reacted positively. The Dow Jones Industrial average has gained more than 250 points, or nearly 1% since Friday’s close, and the S&P 500 industrials sector is also up almost 1% point.

Perhaps investors view the decline in the Chinese yuan, which is 5% lower year-to-date (vs. the U.S. dollar), as an offset to the tariffs.

Additionally, the strength in the U.S. consumer and domestic economic environment is often viewed as a cushion to counterbalance some of the tariff impact. We continue to prefer trade issues be resolved sooner rather than later so certainty can return to the market.