This column needs to be somewhat of a hodgepodge of ideas, because the one consistent thesis that has moved our investment needle for the last year and a half – the supply shortage in crude that continues to emerge – hasn’t shown any signs of weakening. But some other, trade associated ideas have come into the picture that we must be aware of, and use to fine tune our investment strategy.
These are three main ones:
First, there is the continuing threat of a trade war. While President Trump had once backed away from the plan of steel and aluminum tariffs when it was announced in March, since May he has again signaled wide-ranging metals tariffs to go into effect starting on July 7th. Since those signals in May, most traders, and in fact the markets at large, have been treating the tariff threat with sangfroid – assuming that again the President would have to retreat from a trade war with our Allies and China. And while the White House has backed down from additional threats of intellectual property penalties on Chinese electronics and tech, the plans for the metals tariffs still remain in place.
Understanding that the targets of these tariffs – both our allies and China – have indicated that they will strongly retaliate with tariffs of their own and, in the case of China, with perhaps other even more targeted measures, it is tough to see another way out of this dilemma than for Trump to at some point blink and step back…