Simply Money

Simply Money

Each weeknight at 6pm, Simply Money makes money simple for you. Join hosts Amy Wagner and Steve Sprovach as they share easy-to-understand and...Full Bio


Our trade ‘spat’ with China escalates

Last week was perhaps the most highly anticipated week of the year with the U.S./North Korea summit, the Federal Reserve hiking short-term interest rates, the U.S. releasing its list of Chinese products subject to tariffs, and China stating they will respond with tariffs of equal scale. One normally would have expected tremendous stock volatility, but stocks were calm.

On Friday, President Donald Trump announced the list of tariffs (or, taxes) on $50 billion of Chinese goods, which target technology products. The first round of $34 billion go into effect on July 6, and the tariffs on the remaining $16 billion of goods are under review.

China immediately responded with retaliatory tariffs of equal value, targeting U.S. agricultural products (such as soybeans) and automobiles to also be imposed on July 6. The markets seem to be accepting these tariffs as part of a negotiating strategy that will eventually end with a comprehensive deal. Regardless, this raises the risk of the current trade “spat” escalating into a full-blown trade war.

Also last week, The Federal Reserve (Fed), our nation’s central bank, raised short-term interest rates for a second time this year by increasing them 1⁄4 of a point to a range of 1.75-2.0%. The Fed signaled that a September hike is very likely; and according to Bloomberg, there is about a 75% chance of a hike in December.

The Fed’s economic outlook was positive, as its forecasts showed increasing economic growth, a falling unemployment rate, and modestly rising inflation.

Economic data last week was mixed with inflation data mostly in line with expectations, manufacturing data slightly disappointing, and retail sales surging higher. The retail sales data is the most important since spending by you, the consumer, accounts for 70% of the total U.S. economy.

The Simply Money Point

Markets are likely to stay focused in the short run on trade with China, meaning you should expect some stock turbulence over the next few months. However, the U.S. economy is still on very solid ground with most economists expecting growth around 3% in 2018.

This economic growth will help lift corporate earnings, which have historically been the most important driver of stock prices over the long run.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of  risk, and there can be no assurance that the future performance of any  specific investment, investment strategy, or product (including the  investments and/or investment strategies recommended or undertaken by  Simply Money Advisors), or any non-investment related content, made  reference to directly or indirectly will be profitable, equal any  corresponding indicated historical performance level(s), be suitable for  your portfolio or individual situation, or prove successful.  Due to  various factors, including changing market conditions and/or applicable  laws, this content may no longer be reflective of current opinions or  positions. Moreover, you should not assume that any discussion or  information contained here serves as the receipt of, or as a substitute  for, personalized investment advice from Simply Money Advisors. To the  extent that a reader has any questions regarding the applicability of  any specific issue discussed above to his/her individual situation,  he/she is encouraged to consult with the professional advisor of his/her  choosing. Simply Money Advisors is neither a law firm, a certified  public accounting firm, nor a tax advisory firm and no portion of the  blog content should be construed as legal, accounting, or tax advice.  Please consult your own attorney, accountant, and tax advisor for legal,  accounting, and tax advice. A copy of the Simply Money Advisors’  current written disclosure statement discussing our advisory services  and fees is available for review upon request. Advisory services offered  through Simply Money Advisors, a SEC registered investment adviser.  Insurance services are offered through Simply Money Insurance Agency, a  separate entity from Simply Money Advisors. Simply Money™ and the spiral  symbol are trademarks of Simply Money IP Holdings, LLC.