It is possible. Trump has a habit of blasting the horn only to back off once he gets the concessions he's looking for. I wonder about China, though. A lot of people are saying Trump is an idiot for starting a trade war, but I think that opinion is naive. The fact is that China has been stealing our IP, blocking US companies from doing business over there, requiring that our companies have JVs with there's to get access to their markets, imposing massive tariffs and other restrictions, all the while we impose almost no restrictions on their companies doing business in the US. So the reality is that China has been engaged in a trade war with the US and the rest of the world for over 30 years. We've been giving away the farm to China for a long time and they've now grown so large off of stealing our markets that we are just starting to notice that they pose a real threat. So Trump's actions really are too little too late, but at least he's doing something.
In that context, I think Trump may not back off so easily on the China battle. So it's really in the hands of the Chinese. They are playing it beautifully, stoking up the trade war angle and encouraging the rest of the world to ignore their own trade abuses and blaming the US for our hostile trade policies. It's a misdirection that the liberals are amplifying, because they hate Trump so much. The more China does that, the more he will inflame Trump. The thing to know about Trump is that when the world is against him, he doubles down, he doesn't back off. So if China really wanted Trump to back off, they would give him enough of what he wants and make him look like a good guy. That's all Trump wants...is to come across as a savior that stood against the world and won. I don't know if China understands that about him yet.
So that leads me to the conclusion that this trade war could drag on a bit. Then the other backdrop is the Fed's rate rises and QT. That is a vice that is relentlessly pulling liquidity out of the market, just as I posted a few months ago. I think ultimately over the next 1-2 years, that will drive 90%+ of the variation in the stock market, just as my models are predicting. The other stuff will just be noise that bounces the markets up and down a bit. I still think we will see a 50%+ downdraft from the highs before this cycle is done.
As that happens, it will pay long term investors handsomely to buy into the beaten down areas, when the dividend yields rise to more healthy levels. Like you said, we're already starting to see some areas like that...VNQ, VNQI...although, I don't know if those are done correcting yet. Have you looked at mREITs? NLY and a then others that favor variable interest rate structured products. They might be a good buy, though they can be volatile. |
