This is an age old question and the answer you get depends on whom you speak to and when.
Advice on Navigating the Effects of a Possible Trade War
Is there a trade war on the horizon?
Presently, the world’s eyes are on the U.S. in anticipation of a possible trade war, a development that will surely have a negative impact on the markets.
Trump’s ‘America First’ policy assumes that the United States, as the world’s top economic leader, can behave freely and independently when it comes to trade.
The GATT removes tariffs and quotas and promotes trade.
For many decades, international trade has been encouraged globally by removing barriers to trade. This is due in part to the creation of the General Agreement on Tariffs and Trade (GATT) whose purpose is to eliminate trade barriers such as tariffs and quotas, thereby promoting international trade.
The basic principle of these agreements is reciprocity. It is not surprising that the stock markets have tumbled as investors are worried about the U.S. trade war with China and other nations.
Expect the markets to remain volatile for the time being.
I’m of the opinion that the concern about trade policies will not disappear overnight and the markets will remain volatile for some time. The key decision an investor needs to make is: Should I buy, sell, or hold the shares?
Take advantage of dips in the market.
Some good quality shares have corrected during the past few weeks and are trading between 10 and 15 % below this year’s peak. In a diversified portfolio with a long term investment horizon, I’m of the strong opinion that dips of the stock
market are ideal opportunities to buy blue chip quality shares with a strong growth performance.
I don’t have a crystal ball and I can’t predict the future, but I know from my past experience that markets have always recovered after crises, depressions, political and trade tensions, and wars.
Jump in before a strong, initial recovery.
One reason it is risky to sell and hold cash is that investors often miss the explosive start of a rebound and are sitting on cash far too long. The following shares have good recovery potential: Roche, Lonza, Axa, Procter & Gamble, Eli Lilly, Exxon, Dow DuPont, Bayer, Volkswagen, Siemens, and Deutsche Bank.
If you have any questions regarding this article or need some personalized guidance with your own investments, please do not hesitate to contact our office.