Via Bloomberg
.jpg)
This article I came across on Bloomberg yesterday reminded me of the strange dynamic we currently have going on. As the threat of tariffs loom, it becomes a source of concern for central banks across the world and, the almost goes without saying reason, for keeping interest rates low. In turn the low rate environment is a perfect one for companies to keep expanding and growing through cheap bank loans with small interest repayments. This makes for a positive environment for equities to keep climbing.
Currently the S&P500 is just 4% off a record high and that has been during the last 2 years of tariffs going back and forth between the US and China. Now, Adam made an excellent point a few days ago that the concern is that if the US and China don't make some kind of deal, and they antagonise the situation by pushing allies to take sides, then there could be a real bite to the world's GDP. However, we are not in that situation just yet. For sure we are seeing Geo-political powers play out and if history has taught us anything it is that the human race is greedy, bloody, violent and acts in the face of reason continually. We can't expect our day and age to be any different, so it really is a case of watch this space as Sea power (the West) meets the land power of the East (China and Russia).
For now, the falling central bank rates are keeping US Equites up and the trade wars are keeping the central banks easing. In this way, It is strange but true, that the trade war is actually supportive for Equities, for now...
