Private Client Group

March 24th, 2018

Trade Wars, Interest Rates, Spending Bill and More

Share
Subscribe

The next few months could be high impact in terms of trade, inflation, growth, and price pressures. Read on to get all the details in this week’s edition of Steady Investor’s Week.

Steel and Aluminum Tariffs Go into Effect – effective March 23, the Trump administration’s steel and aluminum tariffs go into effect, which has companies and countries who rely on the products scrambling to qualify for exclusions to the tax. The U.S. Commerce Department states that all requests for exclusions should “clearly identify, and provide support for, the basis upon which the exclusion is sought,” adding that it could take up to 90 days for an exclusion to go into effect. So far, the U.S. has already given temporary exemptions to Canada, Mexico, the European Union, Argentine, Australia, Brazil, and South Korea – while they negotiate with the United States for policy moving forward. At the end of the day, the steel and aluminum tariff ended up being, at least for now, a much softer blow than originally expected. Canada and the EU are our biggest steel providers by far, and they are exempt from the tariffs. In my view, this story was a classic case of a big fear that turned into an outcome that was much better than expected.1

Tougher on China – China was not one of the countries exempted from the steel and aluminum tariffs, and going a step further, the Trump administration appears poised to levy a massive tariff package aimed at punishing China for their “economic aggression” over the past two decades. President Trump is specifically addressing the imbalance of trade between the U.S. and China, where China has also managed to impose strict rules for doing business there that Chinese companies do not face here in the US. China is apparently already preparing to retaliate with tariffs of their own, focused on U.S. exports of soybeans, sorghum and live hogs. The USDA has already said in response that it stands ready to defend domestic producers that may be harmed by foreign country retaliation, which sounds like language fully acknowledging that a trade war may be underway. The coming months should be very telling ones.2

$1.3 Trillion Spending Bill – House leaders this week passed a $1.3 trillion spending bill that would fund the government until October. The spending measure offers victories to both parties, by including $80 billion in additional spending for defense for Republicans and $63 billion in domestic spending which is largely a win for Democrats. The spending bill does not include any provision for DACA or a border wall (just fencing and improved border security). The bill must pass both chambers of Congress and be signed by the President by Friday in order for the government to avert a shutdown.3

Fed Raises Interest Rates – In a widely expected move, the Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, pegging the benchmark interest rate in a range of 1.5% to 1.75%. This hike marks the 6th time in this expansion that the Fed has tightened, and Chairman Jerome Powell indicated that he expects two more hikes in 2018 – with perhaps four in 2019. In the Fed’s meeting, officials raised their median estimates for economic growth this year to 2.7%, up from 2.5% in December. The Fed also expects the unemployment rate to fall to 3.8% this year.4 The projections do not include the potential impact of a trade war, since the existence of one is more speculation than fact at this stage. The next few months could be high impact in terms of trade, inflation, growth, and price pressures.

While staying up-to-date on these current events can be helpful in guiding your investments, it may also leave you with information overload. Many investors feel overwhelmed by the number of issues they need to stay on top off to keep their portfolio on track. If you have felt this way, you are not alone!

To help you manage the amount of information, we are offering readers a free Portfolio Stress Test.

We believe that our Portfolio Stress Test can help you break through the information overload to see if there is a better way to meet your financial goals. Learn more by clicking on the link below:

Disclosure

1 Source – CNBC - https://www.cnbc.com/2018/03/22/trump-to-exempt-eu-from-steel-and-aluminum-tariffs-us-trade-rep.html

2 Source – CNBC - https://www.cnbc.com/2018/03/22/trump-moves-to-slap-china-with-50-billion-in-tariffs-over-intellectual-property-theft.html

3 Source – New York Times - https://www.nytimes.com/2018/03/22/us/politics/house-passes-spending-bill.html

4 Source – New York Times - https://www.nytimes.com/2018/03/21/business/fed-interest-rate.html

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

ZIM may amend or rescind the stress test offer for any reason and at ZIM’s discretion.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.
READ PREVIOUS
The Next Bear Market Will Come Without Warning
READ NEXT
Bull Market’s 9th Birthday, but is it Too Soon to Celebrate?

Explore Zack’s Archives

View
Mitch's Mailbox
May 15th, 2024
Is Social Security About To Run Out Of Money?
Read more
Private Client Group
May 13th, 2024
April Jobs Report, E-Commerce And Brick-And-Mortar, China Exports Surge
Read more
Mitch on the Markets
May 13th, 2024
Q1 Earnings Season Came In Strong. Why Is No One Talking About It?
Read more
Mitch's Mailbox
May 8th, 2024
Sell In May And Go Away?
Read more
Private Client Group
May 6th, 2024
Fed Holds Rates Steady, A Closer Look At Q1 GDP, High Cost Of A Sweet Tooth
Read more
Mitch on the Markets
May 6th, 2024
The “Wall Of Worry” Is Growing Again
Read more

Daily financial tips directly
from the Zacks family.

Top

Search

Contact

I'm a Private Client I'm a Financial Professional