5/31/2019 Weekly Update: The Trade Wars Continue

Weekly Recap                                                                        

S&P 500                -2.62%

10 Year Treasury   +1.4%

Gold                      +1.67%

Volatility              +18.23%

Weekly Update: The Trade Wars Continue

I’ve often felt that people never really surprise us.  Sure, they frequently fail to behave in a manner that we don’t expect, but that is not because they are acting in a manner untrue to their nature, rather it is our own, internal, expectations or desires that are causing surprise or disbelief.

So, back at the beginning of this month, when Trump reignited the trade war with China, adding additional tariffs, the market reacted with shock and began a month long sell-off.  Similarly, when Trump further expanded the trade war by applying tariffs on Mexican imports, with the threat of a predetermined escalation plan, the market again reacted poorly.  But, at this stage, should we really be all that surprised? 

I’m reminded of the fable of the Scorpion and the Frog.  The story goes like this:  a scorpion asks a frog to carry him across the river.  The frog asks the scorpion, “Why would I carry you across, you’ll only sting me?”  The scorpion responds, “I promise I won’t sting you, after all you are keeping me safe from the water.”  The frog, applying logic, agrees that it wouldn’t be in the scorpion’s interest to sting him and agrees to allow the scorpion to ride on his back.  When they reach the halfway point the scorpion stings the frog causing the frog to die and the scorpion to drown.  However, prior to dying the frog asks the scorpion, “But why did you sting me?”  The scorpion responded, “You knew I was a scorpion.” 

At this stage, President Trump has shown us his nature, maybe we are the fools to believe that he will act differently.  So, the question left to answer then is this:  can the market continue to rise in spite of the actions of the government?  Or, are we late in the cycle and only hoping not to be left holding the bag when the market makes a real concerted sell-off?  If that is the case, then the only rational decision is to hold your nose and allocate a substantial portion to the safety of Treasury bonds. 

Thanks for reading,

Zach and Dave

Calibrate Wealth
515-371-5316  

https://www.calibratewm.com/blog-01

Disclosures

All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.  Tax laws are complex and subject to change. Calibrate Wealth LLC, does not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Calibrate Wealth. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.

This material does not provide individually tailored investment advice. It has been prepared without

regard to the individual financial circumstances and objectives of persons who receive it. The strategies

and/or investments discussed in this material may not be suitable for all investors. Calibrate Wealth

recommends that investors independently evaluate particular investments and

strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a

particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Investing in commodities entails significant risks. Commodity prices may be affected by a variety of

factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii)

governmental programs and policies, (iii) national and international political and economic events, war

and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities

and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other

disruptions due to various factors, including lack of liquidity, participation of speculators and

government intervention.

Foreign currencies may have significant price movements, even within the same day, and any currency

held in an account may lose value against other currencies. Foreign currency exchanges depend on the

relative values of two different currencies and are therefore subject to the risk of fluctuations caused by

a variety of economic and political factors in each of the two relevant countries, as well as global

pressures. These risks include national debt levels, trade deficits and balance of payments, domestic and

foreign interest rates and inflation, global, regional or national political and economic events, monetary

policies of governments and possible government intervention in the currency markets, or other

markets.