Welcome to the Imperfect Storm

Investors see the trade war as an economic contraction

Highlights

• Investors see the trade war as an economic contraction…

• … with stocks down and Treasuries flat

• Equity valuations are not well positioned for uncertainty

• Gold’s strength is rooted in fundamentals

Key Takeaways

Trade Tensions Sink Markets

• The trade situation is fluid now to say the least, as markets start the week on a sour note. U.S. equity futures are in the red and global stock are declining. The Treasury market is little changed, which with the slide in equities means that investors, for now, are leaning more towards the economic contraction side of this trade war rather than any inflationary effects.

U.S. Equities Struggle with Uncertainty

• If you are an investor in U.S. equities in particular, let’s just say that multiples are not well positioned for this degree of uncertainty. The same for credit spreads. The reality is that investors had been pricing in a situation where the tariffs were solely going to be a negotiating tool and likely delayed. Oops!