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Simply Money

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All eyes on trade talks and North Korean summit

It’s a big week in the U.S. and abroad with plenty of important economic data, key central bank meetings, the U.S./North Korea summit, and of course, continued talk about trade with other countries.

Over the weekend, the G-7 meeting wrapped up with the U.S. backing out of a joint statement signed by all seven countries. The G-7 is the “Group of Seven,” which are the seven largest advanced economies in the world, including Canada, France, Germany, Italy, Japan, the United Kingdom, and the U.S.

Tensions were high going into the annual meeting because of the steel and aluminum tariffs (taxes) the U.S. has imposed on our allies. After the G-7 fallout, Canada and the European Union said they are going to implement retaliatory tariffs on U.S. products.

The topic of trade will undoubtedly be front and center this week, especially because on Friday, June 15, the U.S. has said it will release the final list of Chinese products subject to U.S. tariffs. This would raise the prospects of the trade spat with China escalating to a trade war. With that said, China has offered to buy $70 billion of U.S. agricultural and energy products if the U.S. does not go through with the planned tariffs.

The historic meeting between President Trump and North Korean leader Kim Jong Un on Tuesday, June 12 in Singapore (Monday, June 11 at 9:00 pm EST) is expected to focus on achieving peace and denuclearization. Interestingly, if there is positive progress at the summit, some strategists believe that could be good for trade talks with China because of China’s influence over North Korea.

The Federal Reserve (Fed), our nation’s central bank, is expected to raise short-term interest rates for the second time this year on Wednesday, June 13. Wall Street will be looking for clues as to how quickly the Fed might raise rates by paying close attention to Fed Chair Jerome Powell’s press conference, as well as the committee’s interest rate projections.

According to Bloomberg, the market is pricing in about a 68% chance of a total of three interest rate hikes in 2018. However, there is a possibility of four hikes if there are deals on trade and should inflation pick up.

The Simply Money Point

There could be some economic and non-economic noise this week and in the weeks ahead, as contentious trade talks are likely to persist. As an investor, you should continue to focus on the positive economic prospects, including the U.S.’s low recession risk for at least the next six to nine months.

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