The market traded back last week partly due to continuing trade war talk. We want to discuss the numbers. Tax cuts will have a 200 billion dollar impact, repatriation will have a 500 billion dollar impact, steel and aluminum tariffs will have a 9 billion dollar impact and potential EU retaliation will have a 4 billion dollar impact. This trade war talk could be short-term noise. We are still focusing underneath the hood on what we think is important. We still have strong corporate earnings, robust consumer optimism and low unemployment. This is a very important week because the G20 summit starts. NAFTA is exempt from this because of negotiations going on. So this will be something to keep an eye on.
There is speculation that this week we might see a bipartisan group come forward, as they talk about the spending bill and want to implement a large amount of money into infrastructure spending. If that comes about, in addition to the need for steel, that could eliminate talks on steel tariffs if the U.S. is producing their own. A similar debate would be energy independence in which the U.S. started producing their own.
One interesting statistic involving concrete is that China uses in 3 years what the U.S. used in 100 years. Also, there could be a big debate that China owns a lot of our debt. One concern is that they will stop buying that debt. People should keep in mind that we have the highest interest rates in the world. The Fed will meet to maybe even increase the rates even higher. There will be many debates and negotiations to keep an eye on.
There is a great possibility that commercial lending, super regional banks and community banks could take off in the later part of the year. This could help markets as lending can further grow companies. The reason for this is that Dodd-Frank was rolled back this week by the Senate. It is now going to the House which could give a lot more relief to small banks. There are three categories being money center, super-regional and community. Categories 2 and 3 are about to get a lot of regulatory relief where they can lend the money out and in turn grow the economy.
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