During the past week, stock prices dropped sharply on fears the trade dispute between the U.S. and China had escalated. Investors woke to the news on Monday, August 5, that the People’s Bank of China had manipulated its currency, allowing the yuan to fall to its lowest level versus the dollar in a decade. A weaker yuan makes Chinese exports less expensive in foreign markets. It can also help offset the impact of U.S. tariffs on Chinese products.1 The currency news comes just days after the U.S. announced plans to enact $300 billion in tariffs on Chinese goods starting in September. The new round of tariffs are in addition to the existing 25% tariffs imposed on $250 billion in Chinese products. It also comes less than a week after the Federal Reserve lowered short-term interest rates by 0.25%.2,3 For investors of any level, this type of market volatility is unnerving and can make you question your portfolio’s approach. But remember, your financial strategy is based on your goals, your tolerance for risk, and your time horizon. We designed this approach so you do not have to panic during volatile times. What are we doing about this? We're closely watching Interest rates, currency valuations, and specific global economic data (the PMI Survey, if you're curious). This data helps us understand where we are in the economic cycle. What should you do about it? Our portfolios have held up really well in this August downward move. If anything has changed in your financial timeline, then definitely let us know. If you aren't in one of our institutional portfolios (or you aren't sure), then reach out and we can discuss. |
1 - Washington Post, August 5, 2019 |
Trade Disputes, Market Volatility, and Your Portfolio
August 07, 2019