In The Lonely Bull

That is the question.

Whether it is smarter to accept an incomplete, flawed agreement or

To resist to pursue nobler enduring objectives

And by this accepting the consequences, the slings and arrows of discontentment and misfortune

Apologies to Shakespeare, this is where we are.  The trade war has extracted pain on both sides.  Our farmers and some manufacturers, relying on Chinese parts and other inputs, have taken the brunt.  Soon it may be consumers, if the December tariffs go into effect on many goods, we all buy regularly.

Investors have put their hopes in some resolution.  Our political leaders have signaled, more than once, that progress toward at least a partial solution was near.  Pressures to come to agreement are evident on both sides; yet no agreement.

What happens if no agreement or even a partial step is not achieved?  Again, that is the question. So far, our economy outside of some manufacturing and agriculture has continued to hold up and even expand.  This will probably not continue under the weight of continuing and additional tariffs.  We will slow down; we already have, but that should not be too serious.  Optimism for continued recovery of certain industrial and business cycle sensitive stocks will wane.

This will not be met gladly by investors; there will be selling.  This is potentially a binary event; deal or no-deal.  If a deal, then many industrial, material and other business sensitive companies will signal relief and continue to be bid up.  Otherwise, investors will once again crowd into the so-called safe stocks.  We don’t believe the sell-off would be bad, but it may shake things up for a little while.  We already have had several of these on other occasions where an agreement failed to materialize.

Soon after one setback, investors focus on prospects for a revival of talks and hopes for an eventual resolution.  In the meantime, well run companies will continue to find ways to grow and prosper.  Increasingly, the U.S. and Chinese economies will disentangle and go their own way.  So, no need to be overly concerned.  We will all see how the trade talks work out; stay steady my friends.

The Lonely Bull

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