The global trade war is in full effect, escalating uncertainty in the markets, business and investment portfolios.
Allan Small, senior investment advisor of the Allan Small Investment Group with iA Private Wealth, discusses the turbulent effect of the U.S. tariffs on the global markets and what trends in stocks and market action during the summer.
Small discusses the negative market reaction to U.S. President Trump’s tariff stating that tariffs lead to higher pricing and that leads to inflation, and that can lead to unease on the price of goods around the world.
He also points out that oil prices are declining, “If tariffs cause a slowdown in global growth that will have a negative impact on oil (and) Opec nations like Saudi Arabia (will)start producing more oil.” Adding, “We could see a US$50 a barrel (WTI).”
On the gold front, Small anticipates a lot of volatility with the price of gold. “When there’s more chaos, the more gold goes up, (and) the weaker the U.S. dollar, the higher gold goes.”So a lot of things affecting gold, and I would anticipate a lot of volatility with the price of gold as well.”
Small points out the uncertainty that is circulating around everything from steel, aluminum, lumber as well as pharmaceutical and technology chips.
On a global scale the tariffs could slow down growth, “When you have uncertainty, businesses hold back their expansion plans. They don’t tend to spend as much money, borrow as much money to grow business”, Small adds.
He also acknowledges that if the tariffs go away as quickly as they came, there is the possibility of warding off a recession. However, if the tariffs linger for a period of months, it will have its toll on the economy.
Investing in uncertain times
Small points out two recent times of uncertainty, March 2020 (COVID) and the financial crisis in 2008. He notes that we are just getting starting in the trade war, but people want to know what to do when they are feeling nervous and uncertain.
Many of his clients are concerned about retirement and are feeling that they just don’t have enough time to recoup the losses.
To that Small still believes that “Time is on your side (and) you will be investing, probably, until the day you’re no longer on this planet.”
When asked if there are some investing suggestions at this time, Small recognizes his contrarian view and likes good quality names that are trading a lot cheaper. “You want to look at names that you feel based on analysis, fundamental analysis, technical analysis, (or) whatever analysis you want to use, you just got to do your homework in general, and you want to buy the names that make sense that have sold off the most.”
Small concludes that instead of just sitting on your hands or getting scared and selling, this is a good time to upgrade your portfolio.
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