Analysts now warn that a protracted trade fight will further diminish profit margins after a year of weakening corporate profits from manufacturers, tech and other companies due to increased trade barriers.
“It’s extremely difficult to base any investment thesis around trade, given how challenging the protagonists are,” Colin Reedie, co-head of global fixed income at Legal & General Investment Management, told the WSJ. “It’s been a fairly bullish risk environment, and markets are squeezing higher toward the end of the year, so they are a little bit more vulnerable to bad news.”
Further adding to the uncertainty, France threatened retaliation over potential new U.S. duties on French products, which were implemented as a retaliation against a proposed French “digital tax”.
“We’ve seen this happen numerous times, where there’s a trade disappointment and there’s a stock market sell-off,” Bucky Hellwig, senior vice president at BB&T Wealth Management, told Reuters. “There’s disappointment that ‘phase 1’ (of a U.S.-China deal) has been pushed back.”
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