News & Insights
Staying Invested: A Breakdown in U.S.-China Trade Talk Increases Volatility
Leigh Moglia CFP®
For the first four months of the year, equity markets stormed higher with little volatility. The widely followed S&P 500 index was up 18.25% through April, driven in large part by the Federal Reserve’s decision to pause interest rate hikes, strong employment trends, and the expectations that the U.S. and China were close to finalizing a deal on trade. Then, in early May, negotiations took an ugly turn.
So, what has changed and why has a deal between the US-China seemed to have fallen apart so suddenly? Though difficult to pinpoint the exact causes for the breakdown in talks, it is being speculated that President Trump was upset when China tried to remove certain commitments from an existing draft agreement. Commitments that pertained to changes in Chinese law cover issues that range from intellectual property protection to the forced technology transfers. In response, President Trump, perhaps already frustrated by the pace of negotiations, sent out a tweet on May 5th in which he threatened to increase tariffs from 10% to 25% on ~$200 billion worth of Chinese goods. A threat he followed through with just 5 days later.
The step up in national rhetoric by both the United States and China has re-introduced volatility back into a market that has been unusually complacent so far this year. With the equity markets down ~5% from their late April highs and a drawn out trade war looking more likely, investors may be tempted to run for the exits. However, it is times like these where we advise our clients to focus on their long term objectives and not make dramatic portfolio adjustments based on short term events. We are confident in our beliefs because that is what the data tells us. As you can see from the chart below, the ability to time the market is a fools game and impossible to do successfully over the long term.
As we have seen on several occasions during the current bull market, sticking to your well developed, diversified investment plan is the best approach to helping you attain your financial objectives. As always, please do not hesitate to reach out to us should your situation change.
The Information contained in this document is based on data received from third parties which we believe to be reliable and accurate. YorkBridge Wealth Partners, LLC has not independently verified the information and does not otherwise give any warranty as to the truth, accuracy, or completeness of such third party data, and it should not be relied upon as such. Any opinions expressed herein are our current opinions only. YorkBridge Wealth Partners, LLC is an SEC Registered Investment Adviser under the Investment Advisers Act of 1940 (“Advisers Act”). Registration of an investment advisor does not imply any specific level of skill or training. The information contained in this document is to assist with general planning. Please consult with your own tax advisor and attorney for more specific information.