Third-quarter US stock markets have faced a formidable array of media distractions, ranging from hurricanes to Trump tweets to SCOTUS scuffles – and on and on.
We’ve focused on portfolio structure that is buffered from the Trump Trade War. We favor domestic and smaller and mid caps. We like healthcare and defense. And some cash reserve is in place as the quarter ends. That could change at any time.
The negative effects of the Trump Trade War are offsetting the positive effects of lower taxes, repatriation, and deregulation. The rest of the year is likely to be volatile.
Two expected impacts from the Trump Trade War are more inflation and a growth slowdown. The first will eventually show up in higher consumer prices, since the tariffs are really just a form of a national sales tax collected at the US border and remitted to the US Treasury. China does NOT pay the Trump tariffs; American consumers pay this cost.
The slowdown element takes time to reveal itself in reductions of earnings. We already see company warnings. It will take a few quarters to get to actual earnings revisions and disappointments.
David R. Kotok
Chairman and Chief Investment Officer
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Cumberland Advisors Market Commentaries offer insights and analysis on upcoming, important economic issues that potentially impact global financial markets. Our team shares their thinking on global economic developments, market news and other factors that often influence investment opportunities and strategies.
