In a recent New York Life Investments blog post on volatility, Sal Bruno and Mark Lacuesta aptly refer to trade wars as a “known unkown.” The capital markets are certainly aware of the trade wars, but what they will bring in terms of ramifications is anybody’s guess.
“The increase in volatility during October could be attributed to the impact of “known-unknowns” such as the evolving trade war with China, the speed of rising input costs, slowing capital expenditure spending, and Brexit negotiations becoming better understood,” the post noted.
Even if nothing materializes at the G-20 meeting, in 2019 or at all, some companies have the economic wherewithal to sustain an extended trade war and others will simply stay to continue tapping into a Chinese consumer market that boasts a population of almost 1.4 billion people.
“We’re not expecting to see a massive corporate exodus from China. These U.S. companies have been in the market for years and they’re now aimed at gaining market share,” said Nick Marro, a Hong Kong-based analyst with The Economist Intelligence Unit. “If we remember the core concerns over the trade war, they’re really looking at market access concerns. The whole goal of this from the U.S. perspective is not to abandon the region.”
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