This past weekend held plenty of twists on the trade front. The G7 meeting in France was the backdrop for numerous headline-making events, including the announcement of a framework for an enhanced trade deal with Japan focusing on U.S. agriculture. The tit-for-tat tariff war between the U.S. and China has led the market to seemingly rise and fall 1-2% on any positive or negative headline. This type of environment proves difficult for investors because sentiment changes quickly. However, staying focused on the long-term fundamentals and letting technical indicators drive any short-term repositioning is the best strategy. Don’t let the headline of the moment impact your disciplined approach.
The global economy is clearly weakening and negative interest rates appear to be making things worse rather than better. Despite this backdrop, the U.S. economy is poised to outperform, but is not immune from these global factors. I do expect the Federal Reserve to reluctantly ease rates 25 basis points in September, but the debate about the soundness of this policy is only going to get louder. The odds of a miscalculation on the global front could have a significant impact on the economy and markets. I am concerned that the disruption in global capital flows could lead to an increase in volatility during the fall.
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