This is why so many in the administration have tried to assure us that all this tariff business is just negotiating. They believe in free trade; they just want it to be fairer, and they believe these tactics will help make that happen. I have doubts about this strategy, but I’m pulling for them to work because that would be a better world. I don’t understand people who route against their country.
The slowdown in the economy has been driven by business investment, or the lack thereof, and the slowdown in business investment has been driven by uncertainty in international trade. The stock market seems to understand that, even if many who pontificate about the market do not.
“There is no such thing as a free lunch.” This age-old wisdom used to be common knowledge. Today politicians go around claiming they can make everything free. Charles Schwab announced this week that trading in certain securities is “free.” TD Ameritrade followed suit. Is it true? Of course not! There is no free lunch in trading, and there is no free lunch in a trade war.
This up-down nature is sometimes blamed on the Fed and interest rates, and sometimes blamed on the trade war. In our opinion, the latter explanation is the correct one. Our current administration seems to view life as a zero-sum game. That is a very bleak way of looking at life; life is a win-win proposition.
The first step in solving a problem is figuring out what is causing it. Too often we get so focused on the symptoms that we forget to treat the disease. The market – which has had a fantastic year – is having a tough few days. There are two competing causes: trade and Fed policy. So, which is it?
