Imports & Exports
For the fourth week in a row, the trade talk and banter back and forth has caused volatility in the markets. On Friday, China said it was going to impose an additional $75 billion on U.S. imports. That includes a 25% levy on U.S. autos. In the vlog today, we have included a chart that shows the sectors that have been hit the hardest by the new tariffs. Some of those include electronics, machinery and engines, aircraft parts, medical instruments, vehicles and many more. What is interesting is that they are imposing tariffs on components and parts of products that they end up exporting out. So, they are hurting their own exports by putting tariffs on the imports. We question how long they are going to continue to do this. One thing that is a concern for us is we’re looking to see what impact it has long-term on the markets because we’re starting to see the consumer numbers take a hit. For the past couple of months, the consumer has been very strong but for the past two weeks, we have started to see some reports showing that it could start to go in the opposite direction. That impacts the market long-term and that’s where we truly have concerns. People see the headlines, but you must drill down on the details to understand what is truly going on. This is the type of thing that causes volatility in the markets.
From a technical analysis standpoint, the S&P 500 closed at around 2,847 on Friday. That’s very close to the August 5th lows of 2,822. The point being is that if the S&P 500 bounces off that number or goes higher, we’re still seeing buyers in the market. If it breaks through that 2,822 then the next support level is 2,802. We tell you that just so you can watch the indices, including S&P 500, to understand that we’re watching it not only on fundamentals but also technical analysis.
Late last week the Nebraska Supreme Court upheld the Keystone Pipeline. The only decision waiting to be made is from the Supreme Court of Montana. Once they decide, it will likely create a huge infrastructure project in the middle part of the country. You can make a certain amount of revenue line on the tariffs, but you can lower your cost too which would typically provide the net income at a company on earnings to be as high or better. After technology, the energy revolution is the next phase to cause a positive impact because we are mostly energy independent. We’ve been watching the service sector which is still good as well. There’s a group we follow called Capital Economics that watches manufacturing data. They have reported that the last 25 years there has been a broad slow down worldwide. It would be good to continue that slow down, globally, because that is a very reliable indicator of the economy.
People are so engrossed in China and the volatility being created that they’re not paying attention to Europe. There’s a whirlwind of noise surrounding the U.S. and China trade deal, but we get a lot of client questions about how the rest of the world views the United States. Europe is currently putting together a $110 billion stimulus plan in order to catch up with U.S. tech companies. That’s a lot of money being put towards catching up with the U.S. and China. Prime Minister Boris Johnson of the UK is three months away from the helm of Brexit. At the G-7 Summit, which is made up of the 7 biggest economies in the world, the U.S. and UK have alluded to the fact that they are putting together one of the biggest plans they’ve ever had after Brexit is completed. In addition to that, back in July, France put a 3% digital tax on large tech companies. They’re discussing drawing up a draft proposal to repay that 3% back. As we see, the U.S. and China have been the talk and noise of everything going on but there might be some future relief in other areas, such as Europe. We are still very pro-U.S. at this point but are continuing to be cautious.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
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