Don’t Forget To Include Your Pets In Your Home Evacuation Plan

Many homeowners will form evacuation plans for their homes and practice them with family members, but most have failed to include their pets.  An evacuation plan is a necessity for every home, especially if you live in an area where fires, and other disasters are a possibility. Take these steps to add your pets to your evacuation plan.

Assign pet evacuation responsibility to an adult. 
Everyone in the household should know what to do during an evacuation. That includes assigning one parent or adult to the pets. This allows the other parent and the children to focus on their part of the evacuation plan, so there’s no confusion during a high-stress moment when time is of the essence.

Keep evacuation maps and pet carriers readily accessible. 
If you need to evacuate, you should know exactly where every important item is located. If your pets require carriers, keep them in a place that you can access easily.  Don’t forget any essential medications which might not be easily replaced in an emergency situation.

Practice your plan. 
Include your pets in your home evacuation drills. It will help you see how they will respond and make changes to your evacuation plan if necessary. Getting your dog out of a window may not be as simple as you think!

Be prepared in case you get separated from your pets. 
No matter how much you drill your evacuation plan, it’s possible that a dog or cat will run off while you’re focusing on keeping your family safe. A microchip or a GPS-compatible tag can help you find your pets once it’s safe to return to the area. Make sure all pets wear collars and tags with up-to-date identification information. Your pet’s ID tag should contain his name, telephone number and any urgent medical needs

Get a Rescue Alert Sticker
This easy-to-use sticker will let people know that pets are inside your home. Make sure it is visible to rescue workers (we recommend placing it on or near your front door), and that it includes the types and number of pets in your home as well as the name and number of your veterinarian. If you must evacuate with your pets, and if time allows, write “EVACUATED” across the stickers. 

Market Commentary – May 28, 2019

Market Commentary – May 28, 2019

U.S. stocks have had a great run.
During the past decade, the profitability of U.S. companies increased rapidly. Strong corporate earnings helped the U.S. stock market outperform markets in other nations by a significant margin. According to Capital Economics, “Since the start of this decade, the average annual return from the MSCI USA index of mid- and large-capitalization U.S. equities, which closely tracks the S&P 500, has been roughly 13 percent. This compares to only 7 percent from the MSCI World ex USA index of comparably-sized equities in 22 other developed economies.” Performance was measured in local currency.

Through the end of April, year-to-date returns for U.S. benchmark indices were soaring. T. Rowe Price reported, “Stocks recorded solid gains in April, continuing their strong start to the year. The S&P 500 and Nasdaq Composite Indexes hit new all‑time highs at the end of the month, while the other major benchmarks remained modestly below the peaks they established in the fall of 2018…Renewed confidence in the global economy seemed to be a primary factor boosting sentiment in April.”

Since early May, when trade discord resumed between the United States and China, major U.S. stock indices have lost value. Ben Levisohn of Barron’s reported the Dow Jones Industrial Average has fallen 3.5 percent since May 5, the Standard & Poor’s 500 Index is down 4.1 percent, and the Nasdaq Composite has surrendered 6.5 percent.

There are reasons to believe stock performance may not be as strong in the future. Last week, there were signs U.S. and global economies may be slowing. Randall Forsyth of Barron’s reviewed some indicators. “Long-term U.S. Treasury yields…fell on Thursday to their lowest levels since October 2017, before ticking up on Friday. At the same time, copper and crude-oil prices fell on the week. Those indicators of economic weakness were underscored by a drop in the flash IHS Markit Purchasing Managers Indexes to a shade above 50, the dividing line between expansion and contraction for the economy. Whatever the factors at work, the U.S. economy is slowing.”

The Federal Reserve Bank of Atlanta’s May 24 GDPNow forecast, which is a weekly estimate of potential economic growth for the year, projected the U.S. economy will grow 1.3 percent in 2019.

After a great decade and a stellar start to 2019, U.S. stock markets may be cooling off.

It’s not capture the flag.
Like competitive gaming and Ultimate Frisbee, some may categorize pillow fighting as an activity rather than a sport. Jack Tarrant and Yoko Kono of Reuters described the last week’s All Japan Pillow Fighting Championship qualifier in Shizuoka Prefecture in this way:

“A mix between dodgeball and chess, the aim is to protect each team’s ‘King’ from being hit by pillows whilst trying to hit the opposition’s ‘King’ during two-minute sets. One player on each team can also use a duvet as a shield.”

Japan isn’t the only country to embrace pillow fighting. Since 2008, when International Pillow Fight Day was established, annual pillow fights have been launched in cities around the world, according to Awareness Days. Since the first World Pillow Fight Day in March 2008, the activity has gained popularity “…with pillow fighting flash mobs fighting it out in more and more cities every year…”

NOTE: Pillow fighting is not without risk. In 2015, West Point banned its annual pillow fight after 30 participants were injured.

Weekly Focus – Think About It
“The first colleges to make sports a major part of student life, in addition to the Ivies, were the military academies. They did so for some of the same reasons as the elite schools – athletics instilled character, etc. – but also because Army and Navy endorsed the old General Wellington idea that battles were won and lost on the playing fields of youth. The better the sports program, they reasoned, the better the soldier…”
–Steven Stark, Cultural commentator

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

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* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The FTSE Nareit All Equity REITs Index tracks the performance of the U.S. Real Estate Investment Trust (REIT) industry at both an industry-wide level and on a sector-by-sector basis.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* IHS Markit is a London-based global information provider that was formed in 2016 when Information Handling Services, Inc. and Markit Ltd. merged. It combines information and analytics to provide solutions for business, finance, and government.
* The Purchasing Managers’ Index (PMI) is a measure of the prevailing direction of economic trends in manufacturing and is based on a monthly survey of supply chain managers across 19 industries covering both upstream and downstream activity.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:
https://research.cdn-1.capitaleconomics.com/faf89b/relentless-outperformance-of-us-equities-likely-to-end.pdf (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-28-19_Capital_Economic_Global_Markets_Update-Footnote_1.pdf)
https://www.troweprice.com/financial-intermediary/us/en/insights/articles/2019/q2/monthly-market-review.html
https://www.barrons.com/articles/dow-jones-industrial-average-drops-for-fifth-straight-week-51558749330?mod=hp_DAY_3 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-28-19_Barrons-The_Dow_Celebrates_Five_Weeks_of_Futility-Footnote_3.pdf)
https://www.barrons.com/articles/trade-talks-take-an-ominous-new-turn-51558747006?mod=hp_DAY_1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-28-19_Barrons-The_Trade_War_Takes_an_Ominous_New_Turn-Footnote_4.pdf)
https://www.frbatlanta.org/cqer/research/gdpnow.aspx?mod=article_inline
https://www.reuters.com/article/us-pillowfighting-japan/duvets-discarded-cushions-thrown-at-japans-pillow-fighting-championship-idUSKCN1SV063
https://www.awarenessdays.com/awareness-days-calendar/international-pillow-fight-day-2019/
https://www.usatoday.com/story/news/nation/2015/11/25/west-point-bans-cadets-pillow-fight-after-30-injured-plebes/76382394/
https://www.theatlantic.com/entertainment/archive/2010/09/drill-and-kill-how-americans-link-war-and-sports/63832/

Memorial Day – 75th D-Day Anniversary

Normandy. D-Day. Operation Overlord. The events of June 6, 1944 are known by many names, and have been commemorated in countless books, dramas, and documentaries. You’ve seen the pictures of GIs wading through rough, freezing water onto a murderous, mine-strewn beach. You’ve heard the stories of those who braved smoke and shell to scale the cliffs beyond. But most of the stories we hear were told by the survivors – the lucky ones who made it to the top and saw France on the other side.

What about the others?
As you know, Memorial Day is just around the corner. It’s a day for remembering those who didn’t make it. The ones who gave their lives so that others might live. And since this Memorial Day coincides with the 75th anniversary of Normandy, I think it’s an especially good opportunity to remember the men who couldn’t tell their stories afterwards.
Men like the soldiers of Able Company.

The First Wave
Picture it: Roughly two-hundred soldiers packed like sardines in tiny boats that sway with the choppy sea. This is Company A – “Able Company” – of the 116th Infantry Regiment. Most are in their early twenties and barely into manhood, yet men they are. Long before they land, they are already fighting fear and the worst seasickness any of them has ever known. If they lift their heads above the sides, they can see the imposing cliffs of Normandy in the distance – and the 200-yard beach they’ll have to cross just to get there. A beach that offers no shelter or protection.

But when the order comes – “This is it men, you’ve got a one-way ticket and this is the end of the line,” – they shoulder their packs and lift their weapons, ready to do their duty.1

Until everything starts going wrong.
First, water begins spilling over the sides of the boats, and many are swamped completely. Those that stay afloat do so only because the men of Able Company use their helmets to bail the water out. Other boats, hit by German artillery, catch fire and sink. The noise is deafening.

Then, at 6:36 A.M, the boat ramps are lowered, and it’s time.2   

One by one, the men jump into the frigid ocean. They are not yet on the beach at all, but on a sandbar that stretches up to 100 yards out. To even get to the beach, they’ll have to wade through water that often comes up to their necks. Many soldiers, weighed down by heavy jackets, packs, and equipment, start to sink. Those who can’t shed the weight, drown. Those who can come up gasping for air – only to be greeted by a hail of bullets.

From the cliffs, German machine guns pepper the ocean, decimating Able Company before they even reach the shore. But still they advance. One pair of boots makes it to dry land. Then a second, and a third. They are the first wave, and they know what’s expected of them. What’s required. Despite fire and water, despite mine and mortar, they are the first liberators to step onto the shore.

The first free men to set foot on the beaches of France. But in the meantime, they have more work to do. Medics do what they can for the wounded, pulling anyone who might still be alive from the ocean. Minutes pass. No one from Able Company has yet fired a shot, and almost every officer – the men who give commands, who know the plans and have studied the maps – is dead. The others, leaderless and bloodied, continue anyway. It’s no glorious charge, but a desperate crawl. Liberating France inch by inch, foot by foot.

Thirty minutes later, over half the Company is dead. Most of the survivors are wounded and exhausted. But still they continue. Those who fall lift their heads to shout encouragement one final time. For they are the first wave. This is their job, their mission, their calling. To pave the way for waves to come.

Finally, after an hour, the survivors make it across the sand to the bottom of the cliff. A few join a nearby group of Army Rangers and scale to the top. The others remain behind, holding the beach. Most will remain forever. Behind them comes the second wave.

Seventy-Five Years Later
It may seem like Able Company’s sacrifice was futile, or their assault was a failure. But I don’t think so. Every yard they gained was a yard the next wave wouldn’t have to. Every bullet they attracted was a bullet someone else was saved from. Theirs was the smallest of footholds, yet it was enough – for the next wave, and the one after. For what they did that morning led to everything that followed. By the afternoon, the beach was theirs. By evening, the cliffs were theirs.

And less than one year later, all of Europe was theirs.

History is often written down as the story of great leaders making grand speeches and grander plans. But in truth, history is made up of moments. Moments when normal men and women stared fear in the face and acted. Moments when men and women offered service and sacrifice. Moments that lasted the length of a heartbeat…and yet still affect our lives to this day.

This Memorial Day, I want to remember those men and women. I want to remember the beaches of Normandy. I want to remember the men of Able Company. I hope you can take a moment to remember them, too.

1 “The suicide wave,” The Guardian, June 1, 2003. https://www.theguardian.com/theobserver/2003/jun/01/features.magazine37
2 “First Wave at Omaha Beach,” The Atlantic, November 1960. https://www.theatlantic.com/magazine/archive/1960/11/firstwave-at-omaha-beach/303365

Market Commentary – May 20, 2019

Trade war trade-off.   
There was some good news on trade, last week. The United States took steps to reduce trade friction with the European Union, Canada, Mexico, and Japan.

“The United States on Friday reached an agreement with Canada and Mexico to remove steel and aluminum tariffs, which had been a persistent source of friction across North America over the past year. The deal on metals came as Mr. Trump decided not to press ahead immediately with levies on EU and Japanese automotive products – despite declaring that foreign car and vehicle imports represented a threat to U.S. national security,” reported James Politi, Jude Webber, and Jim Brunsden of Financial Times.

There was some bad news, too. Trade tensions escalated between the United States and China. The United States doubled tariffs on $200 billion of Chinese goods and threatened tariffs on an additional $325 billion of goods. The United States imports about $539 billion worth of goods from China each year, reported the BBC.

In addition, President Trump signed an executive order preventing U.S. companies from using telecommunications equipment made by firms believed to pose a risk to national security. The move is expected to affect the ability of a large Chinese telecoms firm to conduct business in the United States, reported David Lawder and Susan Heavey of Reuters.

China currently has tariffs on $110 billion of American goods and they announced plans to hike tariffs on $60 billion of these goods. In total, China imports $120 billion worth of goods overall from the United States each year.

While the relatively small amount of American goods imported by China would seem to give the United States an advantage in a trade war, China has other means of gaining leverage. The country holds about 7 percent of U.S. debt, which is more than any other nation, reported Jeff Cox of CNBC. If China were to slow purchases of Treasuries, yields on U.S. government bonds may move higher.

A source cited by Reshma Kapadia of Barron’s suggested it is unlikely the Chinese will stop buying Treasuries. “Where would they put the trillions of dollars? Ten-year German Bunds are below Japanese 10-year yields; there aren’t a lot of options…They also don’t want their currency to appreciate, so that handcuffs them…China tends to find things to hurt adversaries without hurting themselves.”

The Standard & Poor’s 500 Index finished the week lower.

Which Cities offer the best quality of life?
In March, Mercer published its 21st Quality of Living Survey. The goal is to help multinational corporations with data that can help them optimize their global operations. The survey considers factors like safety, housing, recreation, economics, public transport, consumer goods, and more. For 2019, the cities offering the highest quality of life were:

  1. Vienna, Austria
  2. Zurich, Switzerland
  3. Vancouver, Canada
  4. Munich, Germany
  5. Auckland, New Zealand
  6. Düsseldorf, Germany
  7. Frankfurt, Germany
  8. Copenhagen, Denmark
  9. Geneva, Switzerland
  10. Basel, Switzerland

Thirteen of the world’s top-20 cities were in Europe. The safest cities in Europe were Luxembourg, Basel, Bern, Helsinki, and Zurich. The least safe, as far as personal safety goes, were Moscow and St. Petersburg.

In North America, Canadian cities generally did better than U.S. cities. The highest ranked city in the United States was San Francisco, which came in at 34th. Boston ranked 36th and Honolulu 37th. The safest cities in North America were Vancouver, Toronto, Montreal, Ottawa, and Calgary.

Dubai offers the best quality of life in the Middle East. Dubai and Abu Dhabi were the safest cities, while Damascus was the least safe – in the Middle East and the world.

Singapore, Tokyo, and Kobe had the highest quality of life rankings among Asian cities. Cities in Australia and New Zealand also did quite well, overall.

Weekly Focus – Think About It
“You are all there, the people in the city. I can’t believe I was ever among you. When you are away from a city it becomes a fantasy. Any town, New York, Chicago, with its people, becomes improbable with distance. Just as I am improbable here, in Illinois, in a small town by a quiet lake. All of us improbable to one another because we are not present to one another.”
–Ray Bradbury, American author

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

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* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:
https://www.ft.com/content/9aca49e0-78a3-11e9-be7d-6d846537acab (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-20-19_FinancialTimes-Donald_Trump_Eases_Tariffs_for_Allies_as_He_Focuses_on_China-Footnote_1.pdf)
https://www.bbc.com/news/business-45899310
https://www.reuters.com/article/us-usa-trade-china/us-blacklists-chinas-huawei-as-trade-dispute-clouds-global-outlook-idUSKCN1SL2DI
https://www.cnbc.com/2019/05/16/china-has-cut-its-holdings-of-us-debt-to-the-lowest-level-in-two-years.html
https://www.barrons.com/articles/trade-war-stock-market-outlook-51558120641 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/05-20-19_Barrons-The_Trade_War_Will_Make_Stocks_Scary-5_Reasons_Not_to_Panic-Footnote_5.pdf)
https://mobilityexchange.mercer.com/Insights/quality-of-living-rankings (Click on 2019 City Ranking, Show/Hide full ranking)
https://www.mercer.com/newsroom/2019-quality-of-living-survey.html
https://www.goodreads.com/quotes/tag/cities?page=6

Examining the cause and effect of the new tariffs between the U.S. and China

After months of relative quiet, the trade war between the U.S. and China has erupted again in a big way. The markets are the most immediate casualty, with the Dow plunging over 600 points on Monday alone.1

In all likelihood, you’re probably more focused on things like spring cleaning, your upcoming summer plans, and the end of Game of Thrones. My job in this letter is to briefly explain what’s going on, what matters, what doesn’t, and why you can go back to focusing on those other things

So, here’s what’s going on:
Failed deals lead to new tariffs
You may have noticed that headlines about the trade war had been rather muted in 2019. That’s because negotiators for both nations had been quietly working behind the scenes to come to an agreement on how to address the $375 billion trade deficit the U.S. has with China. The White House expressed optimism that a deal was close – until a sudden hardening of positions prompted both sides to retreat to their corners.

On Friday, May 10, President Trump raised the stakes by placing 25% tariffs on all Chinese imports that had previously been spared. Here’s how the U.S. trade representative put it:
“[The President has]…ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.”2

Throughout this trade war, it has seemed like both countries are waiting for the other to blink first. Both are still waiting. For on Monday, May 13, China announced it would raise tariffs on $60 billion in U.S. goods, some up to as much as 25%.3

Why all this matters to the markets
You’ve heard, of course, of the principle of cause and effect. If one thing happens, something else is affected. Fail to brush your teeth and you get cavities. Leave meat out of the refrigerator too long and it will spoil. You get the idea.
Investors, analysts, money managers, and traders who participate in the markets on a daily basis make decisions based on cause and effect. How tariffs impact certain companies is a perfect example of this. For instance, imagine a fictional American company called Widgets n’ Stuff, or WNS for short. In order to make its widgets, WNS buys thingamajigs from China. But thanks to tariffs, the price of importing thingamajigs goes up.

Investors know this, and thanks to the principle of cause and effect, predict it will have a negative impact on WNS’s finances. Maybe they’ll have to raise prices on their own widgets to make up the difference. Maybe they’ll have to produce fewer widgets. You get the idea. So, investors sell stock in Widgets n’ Stuff because it no longer looks like an attractive investment.

Like them or not, tariffs act as a double-edged sword that affect companies and consumers on both sides of the Pacific. On the American side, China’s tariffs can make it harder for U.S. companies to sell their goods to Chinese consumers. At the same time, American tariffs can make it harder for U.S. companies to import the goods they need for their own products. Either way, prices go up, corporate finances suffer, and consumers are often the ones left to foot the bill. That’s why the markets care about the trade war.

But here’s why all this doesn’t matter to us – yet
The principle of cause and effect is important, but it’s more important to short-term traders than long-term investors like us. That’s because we don’t actually know what the long-term effects are yet. We can guess, but guessing isn’t really a viable strategy in life, is it?

Think of it this way. Let’s say you come down with a fever. The short-term effect is that you probably don’t feel very good. But the long-term effect isn’t yet known. Perhaps it’s just a symptom of a mild cold that will pass in a few days – and that’s why we don’t immediately start chugging antibiotics the moment we feel sick.

While it’s never fun, the markets have fallen after almost every round of tariffs to date. Each time, the markets absorbed the blow, and then rebounded relatively quickly. Previous trade war battles faded into the background and investors turned their attention to other things. Will that happen again this time? We don’t know. And that’s the point: We don’t know what the long-term effects are. What’s more, with the markets having enjoyed a remarkable bull market in recent years, we can afford to be patient. What we can’t afford is to make important decisions by guessing at the long-term effects of these tariffs.

Hippocrates once wrote that, “To do nothing is sometimes the best remedy.” For that reason, it’s okay for you to go back to planning your summer vacation or betting which character will die next on Game of Thrones. In the meantime, my team and I will continue monitoring all the causes and effects in the markets. If, at some point, we have a better understanding of the long-term effects of this trade war, we’ll make decisions accordingly.

As always, please let us know if you have any questions or concerns. We are always happy to speak to you!

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1 “Dow plunges 700 points after China retaliates with higher tariffs,” CNN Business, May 13, 2019. https://www.cnn.com/2019/05/13/investing/dow-stocks-today/index.html
2 “Trump Renews Trade War as China Talks End Without a Deal,” The NY Times, May 10, 2019. https://www.nytimes.com/2019/05/10/us/politics/trump-china-trade.html?module=inline
3 “After China Hits Back With Tariffs, Trump Says He’ll Meet With Xi,” The Wall Street Journal, May 13, 2019. https://www.wsj.com/articles/china-to-raise-tariffs-on-certain-u-s-imports-11557750380

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