Make Profits not War

Here at GreenPort we’ve been channeling our inner hippie. While we were sitting cross-legged around the communal conference table in our tie-dye t-shirts and sandals, Sophie asked this profound question, “suppose they gave a trade war and nobody came”? This is increasingly becoming the likely conclusion to President Trump’s declaration of a trade war with China. So much so that we are considering declaring the trade war the 22nd false cry of wolf within the secular bull market that started in 2009. After some initial posturing, Chinese President Xi sounded like a very reasonable leader in his highly anticipated speech at the Asian economic summit, “China does not seek a trade surplus. We have a genuine desire to increase imports and achieve greater balance of international payments under the current account”. President Xi also announced plans to open Chinese markets, lower tariffs on autos, and do a better job of protecting intellectual property. We strongly doubt Xi’s actions will be as ambitious as his words indicate, however it does confirm our belief that both Chinese leaders and US leaders are rationale and realize that a trade war would lead to the mutual destruction of both economies. Here’s another profound thought. Is it possible that all this trade tension could lead to a more harmonious and open world of trade? Is this generation’s slogan going to be, “make profits, not (trade) war”? Is this going to be the summer of profits? We think that would be really groovy and is becoming increasingly likely. Much of the recent sell-off in financial markets has been attributed to fears of a trade war. As those fears subside markets have started back towards prior levels. However, if improved trade does become reality this would further bolster future earnings and revenues growth that are already in record territory. Trade is also deflationary which is another positive for stocks.

It’s a bit crazy out there, we get it. Being invested in the stock market today takes an emotional toll on investors. Our job is to look through all the craziness and give you our best unemotional thoughts, based on actual data, on what the most likely outcome will be. We have no doubts that many more “crises” will continue to jolt the stock market but as of now we have record earnings growth, reasonable valuation, and modest inflation. Unless we believe there is an imminent change coming to this scenario, our bet will continue to be on a higher stock market, a modest but not troubling increase in both long and short term interest rates, and a slightly weaker US dollar. Peace out The GreenPort Team