The Time Until the Tariff Deadline is Winding Down

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.
[renminbi bills]

Following a record-breaking Black Friday through Cyber Monday shopping spree by U.S. consumers, it will take a major chain of negative events to undue the strong undercurrent of the year-end bullish sentiment.

After all, the consumer has been the driver for the domestic economy in 2019 because interest rates are low, the unemployment rate is low, gas prices are low, food prices are stable, home prices are rising, wages are rising and individual retirement account (IRA) and 401(K) plans are appreciating. One good piece of news is that consumers are doing a better job of managing debt, since the latest data show that households are paying out less of their disposable personal income to service their borrowing than they were in the fourth quarter of 2018.

There is also a prevailing belief that the U.S. economy is not going to enter a recession anytime soon. Instead, the notion of a pickup in gross domestic product (GDP) during the first quarter of 2020 is rising among the collective mindset on Wall Street. If the stock market does take a dive in December, it won’t be for fundamental reasons.

Just to be sure about why the S&P 500 is up 24.3% year to date and sitting at a record high along with the Dow and the NASDAQ — they have gotten there in part on the back of the hope that a trade deal of some kind will get done. If there was real worry about the trade deal imploding because of the signing of the Hong Kong Human Rights and Democracy Act, the market would have shed more ground than what occurred when it was announced, voted on and signed by President Trump.

Exclusive  Daily Data Flow: Normal Open Tomorrow; Global Shares See Modest Rise

There remains a hopeful attitude about the United States and China reaching a trade agreement that will curtail the threat of a 15% tariff rate being placed on $156 billion of imported consumer goods from China starting on Dec. 15. That would be a negative if it were to happen but the reports on the issue this week might spur consumers to spend more in front of that possible tariff deadline and increase the retail numbers that much more.

With the elusive trade deal in the balance, investors have had plenty to focus on this past week when a parade of economic data points crossed the tape. Construction, ISM Manufacturing Index, MBA Mortgage Applications Index, ADP Employment Change, ISM Non-Manufacturing Index, Initial Claims, Continuing Claims, Trade Balance, Factory Orders, Nonfarm Payrolls, Unemployment Rate, the University of Michigan Consumer Sentiment Survey, Wholesale Inventories and Consumer Credit all showed an economy that was on good footing. The Federal Open Market Committee (FOMC) meeting this week will provide more insight.

During the past 15 months of the trade war, U.S. economic data has not caved in as many bearish forecasters had warned. While there have been a couple soft patches, the Fed responded by lowering short-term rates three times this year and the economy’s pace has picked up heading into 2020. Will another round of tariffs on $156 billion of Chinese imports derail a $20 trillion U.S. economy? I don’t believe so.

We’ll know more come Dec. 15 if the mighty American economy can continue to thrive, despite the possibility that the current trade war could ratchet higher. Even if a “phase one” deal with China comes to pass without rollbacks, most of the tariffs on Chinese goods will remain in place. This raises the specter that long-term tariffs will become the “new normal” because there is little evidence that China will curb the state-dominated economic model that gave rise to the trade war in the first place.

Exclusive  Does Trump's 'America First' Motto Help the Global Economy?

It is core to any lasting deal that China stops coercing the transfer of foreign technology as the price of doing business there while also unfairly subsidizing state-owned enterprises that fuel excess capacity and swamp global markets. At this juncture, there are almost no details on China being flexible on these issues. And this doesn’t even get into intellectual property (IP) theft, cyber hacking, currency manipulation and the importation of illegal fentanyl.

U.S. Retail Sales for 2019

There is little evidence to support the notion that China is willing to change its behavior, leaving me to believe that the hefty tariffs on both Chinese and U.S. imports will last indefinitely. Under this scenario, the rally likely will pause and wait on more data to see if there is any material impact on the consumer. Previous tariff enforcement actions on $375 billion of Chinese imports have had little effect on consumer spending patterns in 2019.

An additional round of 15% U.S. tariffs on $156 billion of Chinese imports is a very real possibility — but the size and strength of the U.S. consumer-driven economy supports the assumption that Americans will absorb it, adjust to it, handle it and move forward.

Join Me for the Orlando MoneyShow, February 6-8, 2020, at the Omni Orlando Resort at ChampionsGate. I will be speaking Thursday, Feb. 6, 10:30 a.m. about Double-Digit Income Investing. On Saturday, Feb. 8, I will talk at 8:00 a.m. about Extreme Profits Made Easy. Other investment experts who will be speaking include retirement and estate planning specialist Bob Carlson, Wall Street investment powerhouse Hilary Kramer and world-traveling, free-market economist Mark Skousen, who leads the Forecasts & Strategies newsletter. Register by clicking here or call 1-800-970-4355 and mention my priority code of 049265.

Like This Article?
Now Get Bryan's FREE Special Report:
Top Monthly Dividend Payers

Get paid every single month by some of the world’s biggest companies.

Get Access to the Report, 100% FREE


img
previous article

Investment expert Hilary Kramer reveals a hand-picked stock she thinks can do well despite the latest earnings results

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE