Trade and tariffs were in the news again this week, and investors are caught in a tug of war. The President is focused on his reelection (as all politicians are) and he ran on an America First platform in which protectionism and using tariffs and trade barriers were cornerstones. He also needs a strong economy and stock market for voters to feel good about reelecting him. These can be relatively antagonistic goals. So, one week the President is focused on increasing pressure on the Chinese with more tariffs, and the next week he's trying to mollify the stock market. Add to the fact that a Tweet can come out at any moment with a policy change or reversal and you have markets whipsawed as we have seen this week. Whether you agree with the President's policies or not, that is the world that we live in.
So we start with the obligatory articles on trade, plus why the lobster harvest has been so strong recently, how other countries are restricting trade, a late summer reading recommendation, Roth IRAs, and why social connections are so important.
Enjoy this week's The Friday Buzz. Have a great weekend!
- President Trump Must Have Something in His Eye: Because he blinked. On Monday, with all the negative trade news, the bond market inverted further, and the stock market dropped sharply. On Tuesday, the administration announced the new tariffs would be delayed until mid-December to avoid hurting retailers and consumers for the holiday shopping season. What's surprising is how quickly the President reacted to the market pullback as well as admitting for the first time that tariffs are hurting U.S. consumers and businesses. I'm sure China will do all they can to leverage the President's sensitivity to market swings. CNBC WSJ
- Neither the U.S. or Chinese Economy is Winning the Trade War: U.S. businesses are certainly struggling with higher tariffs. When tariffs on certain goods were at 10%, that was manageable, but 25% is too high a hurdle and making life difficult for companies affected. China is hurting as well, as evidenced by July's industrial output growth coming in at the lowest number in 17 years. Also, what happens if China does something heinous with the protesters in Hong Kong? Will the U.S. not be able to complete a deal on moral grounds? WSJ Reuters CNBC
- Why the Record Maine Lobster Harvests? Well, it's because of climate change. The waters of states further south, like Rhode Island, are warming and driving lobsters north to seek cooler waters. Maine's waters are still cold enough and they settle there. It's why the last few years have been great for lobster fisherman in Maine, but awful in Rhode Island. The problem is that as sea temperatures rise, lobsters will move to cooler water further offshore and north into Canada thus endangering this iconic Maine industry. And change is occurring as Maine and the northeast have had some of the most extreme temperature increases in the U.S. over the last 100+ years as shown in the map in the Washington Post article. The Hill Washington Post
- Other Countries Are Restricting Trade: This week, South Korea removed Japan from its list of favored trading partners. This was in retaliation for Japan doing the same to South Korea last month. Many are suspecting that Japan was upset over wartime reparations. The move will further strain global supply chains as many technology components are made in both countries. This is also significant from the fact that in the past, the U.S. would have stepped in as the leaders of free trade to help resolve the dispute. But the U.S. is now doing the opposite and leading on protectionism and using trade as a political weapon. Global trade issues look like they will be around for a while. But as long-term investors, stay focused on the long-term. WSJ WSJ Worth
- My Summer Reading - Sapiens: I am only half-way through the book Sapiens, but have found it a very interesting read. I have a much better understanding of all human species, where they lived, and how they evolved (or didn't evolve). If you haven't read it, and are interested in human history, it is fascinating. Amazon
- Another Tool for Retirement and Planning: Roth IRA accounts can be an excellent option to save for retirement or use for estate planning. If you missed our article announcement from earlier this week, it is worth reviewing the rules and strategies. Be sure to speak to your advisors if you have questions or would like to learn more about Roth IRA accounts. RSWA
- Mortgage Rates Continue Dropping: It was mentioned in last week's article, but it's worth mentioning again that mortgage rates are very low. Mortgage rates tend to track the U.S. Treasury 10-year bond, which has fallen over the last few weeks and is close to its historic low. It may be a good opportunity to lower your mortgage rate and save on interest. Bankrate.com
- Living Long and Happily with Friends: One of the longest studies ever conducted has shown the power of social ties. Those with strong social connections were happier and lived longer than loners. So hey, get out there and socialize! Ourworldindata.org Youtube/TedTalk
Thank you for reading The Friday Buzz. Have a very social and wonderful weekend!