President Trump announced, on August 1st, that the first increase on $300 billion of goods and products from China, will take effect on September 1st. Since then we have seen some tariffs delayed, on electronic goods, until December 15th. China has also retaliated, since the U.S. tariff hike, by adding more tariffs on their end. We also have had both sides talk about ongoing low-level calls and a possible meeting in September.
Global markets continue to bounce around, based on whatever news comes out next about the tariffs, as the ongoing global slowdown is creating fragility in many countries. Our stock market has been trading within a sideways range awaiting the latest tweet from the President, or a comment from the Chinese administration.
September will be important month as we see how the market reacts to any further tariff retaliation, by either the U.S. and China, but also it will start to price in a highly expected rate cut by the Federal Reserve. Expectations are that there is a 0.25% (96% probability), but the market is looking a 0.50% cut. We can't project how the market will react to only a 0.25% cut, but we do now how badly things will get if Chairman Powell does nothing. There are indications that we are likely to a total of 0.75%, in cuts, this year. But everything still depends on the trade war. An escalation could put pressure on the Fed to cut more, but a trade deal, will likely have them pause. There is starting to be more dissent on the Fed board as some Fed governors are questioning why we are cutting rates for insurance purposes, as the economy is still showing strength and the stock market is near all-time highs. We tend to be in this camp, as we hate to see the Fed weaken its toolbox that might will be needed if we do see a future crisis.
If you have any questions or comments, please contact me.
Chief Investment Officer
AETOLIA CAPITAL LLC
3828 Kennett Pike
Greenville, DE 19807
Office: 302-543-4446 Fax: 302-510-4166
Aetolia Capital, LLC (“Aetolia”) is a Registered Investment Advisor ("RIA") registered with and resident of the State of Delaware. Registration as an investment adviser does not imply a certain level of skill or training, and the content of this communication has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Aetolia renders individualized responses to persons in a particular state only after complying with the state's regulatory requirements, or pursuant to an applicable state exemption or exclusion.
This communication is intended to provide general information about Aetolia. It is not intended to offer investment advice, or to offer or recommend the purchase or sale of any securities or investment product. Investment advice will only be given after a client engages our services by executing the appropriate investment services agreement, and shall be subject to the terms and conditions therein. Information regarding investment products and services are provided solely to inform the reader about our investment philosophy, our strategies and to be able to contact us for further information. Please do not forward or replicate without our permission.