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Market Update

Trade Wars – Trump tariff hits global markets

The repercussions of US President Donald Trump’s move to impose tariffs on steel and aluminium imports have hit investors’ portfolios, according to the FT.

Trump has raised fears of a global trade war since his decision to impose 25 tariffs on imported steel and 10 tariffs on imported aluminium. A trade war could hit China and other Asian companies exporting to the US, the FT warns, while also increasing costs for American manufacturers. Following Trump’s tweet on 2nd March that trade wars are good and threats on 3rd March to impose heavy taxes on imported EU-made cars, UK-based investment funds with money in Asian and Chinese equities, as well as high weightings in basic materials, all fell.

Should I be worried?

Well, there has certainly been a return of volatility into global stock markets since the end of January 2018, with declines across most major indices of 10% or more which would be referred to as a ‘correction’.  This is generally on the back of sharp increases during 2017 and, in my opinion, some markets getting a little ahead of themselves.

However, aside from a potential trade war which could harm global growth, there is actually plenty of good news in the global economy and signs of a global recession which would usually trigger steep declines, are not showing themselves in the data.  Inflation remains generally under control and global growth, whilst not accelerating, remains strong.

In the short term, markets are driven by emotion and there are fears driving the markets currently.  For long term investors this can feel troubling, but it is rather like experiencing turbulence on a long-haul flight. It is uncomfortable whilst it is happening, but it is fairly inevitable and will not stop you reaching your destination on time.

Therefore, whilst the ‘fasten seat belt’ sign might be illuminated at the moment, calmer skies will return.

 

John Cooper, Chartered Financial Planner and Director

 

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.