President Trump will be known as the tariff President and it is possible that his strategy will be successful in the short run and maybe the long run. Some do question if he has an actual strategy, but he seems to like tariffs. Whether they are good or bad or just raise prices for consumers, that will be shown in the longer term, for investors the issue is what should you do or not do.
In an article by Scott Barlow, he reviewed a report by Merrill Lynch quantitative strategist Savita Subramanian issued on June 3. In Ms. Subramanian the issue will likely get worse better getting better. She believes the main consequence will be the CBOE Volatility Index (VIX) will be a sharply higher equity market volatility will be the result. She recommends high quality stocks.
The concern is declining profit margins for her analysis shows almost half of the increase in corporate profits since 2004 has come from increased globalization.
Investors may look to small cap stocks as defensive because they are more domestic in operations, however many small companies rely on multinationals as customers and the demand can dry up as the multinationals cut back on their spending. There has been a sharp drop in spending for industrial and software firms.
Pay attention to the profitability ratios to see how your investments are doing.
Linking to dividend paying companies, often these companies are profitable by doing the right thing in serving their customers who are a diversified over geographic areas. Ideally as an investor you are looking at monopoly or semi-monopoly situations, but the affect of trade wars does affect all the companies. Pay attention to key ratios and if they change you can begin to look at your alternatives. Having alternatives in mind is a key factor in investing.
There are more questions than answers, till the next time – to raising questions.