Today we look at the impact of US trade tariffs on ASX Shares and what it means for your portfolio.
Global share markets have been on a wild ride since Trump launched “Liberation Day” tariffs with global stock markets plunging. When the bond markets fell in response Trump blinked and the market bounced.
Trump blinks and pauses tariffs for 90 days
He paused the tariffs for 90 days, although the base line tariff still stands at 10% and China’s tariff is now an eye watering 125%. But rather than being down 20%+ from the mid-Feb high the S&P500 is down 11%. The same for the S&P/ASX 200.
Where is the market now? Perspective is the key.
Let’s look at CBA as an example. The Commonwealth Bank of Australia is still above $150 at $154, which was only breached late last year.
We’ve just lost about 3 months of gains essentially.
Why did he blink?
An adult entered the room after a sell off of us treasuries prompted fears of more sustained meltdowns.
US 10 year treasury yields went from 4% to 4.5% and are now at 4.3%. These are huge moves.
I can tell you that no major decisions will be made for the next three months.
The response: China, The Fed,
What China does with this is the big question, as one of the biggest, if not the biggest owners of US treasuries
The other big question is what the fed does – If it throws money at the problem this would be a positive, but tariffs as we all know are inflationary – so the likelihood of a Covid or financial crisis response is low I think.
The end result is that the two effects of tariffs – earnings and valuation – are still up in the air.
Whatever the outcome, there remains a higher probability of global recession than there was two weeks ago.
Stock picking is one key because it means you’re not hostage to the market. The other key is buying cheap or basing your decisions on fundamental value, which is what we’re always looking to do at Under the Radar Report.
Join Small Cap and find out what our Small Cap Portfolio Manager is doing in response to make money for the portfolio.
