Stocks recovered last week due to trade tensions easing slightly, but large U.S. stocks finished the first quarter of the year slightly negative for the first time since September 2015.
It was reported early in the week that China was going to reduce its intellectual property transfer requirements for U.S. companies looking to gain access to China’s market. However, Wall Street is still on edge, especially since, over the weekend, China moved forward with its tariffs (or, tax) on $3 billion of U.S. products.
This matches the value of China's steel and aluminum exports to the U.S. Fortunately, China is only matching, not escalating, the U.S. in tariffs.
It’s unlikely this spat turns into an all-out trade war because the U.S. corporate sector (who would be hurt by a trade war) has President Trump's ear and because China benefits more than the U.S. due to its trade surplus.
In other news last week, the final report card for the U.S. economy in the last three months of 2017 showed growth of 2.9%. Even though economic growth has been modest, this is now the second longest expansion ever as our economy has grown for 35 quarters.
The most notable economic release this week will be the March jobs report due out Friday, April 6th. Economists are expecting the economy added 189,000 jobs and that the unemployment rate dropped to 4.0% from 4.1%.
The jobs report will also show how fast wages grew last month. This matters because the pace of inflation will play a key role in how quickly the Federal Reserve (Fed), our nation’s central bank, raises short-term interest rates.
There is currently only a 24% chance of three or more short-term interest rate hikes for the remainder of the year. We believe the Fed will raise rates two more times this year.
The Simply Money Point
At Simply Money Advisors, we expect stock turbulence to continue, especially because of the uncertainty surrounding trade tensions. But keep this in mind: during this recent period of stock market volatility, bonds have risen value, highlighting the benefits of a diversified investment mix.