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Win the Trade War and Lose on Your Investments
The trade negotiations between the USA and China are coming to a head. Will there be genuine gains for the USA? We have written how both the USA and China have issues that they see as crucial to their national prosperity and security in our article about if the trade war becomes permanent. However, neither side wants to suffer the economic pain that could come out of a protracted trade war. China, especially, is seeing economic difficulties on the horizon and needs to do something sooner rather than later. So, there may well be a deal forthcoming. However, from the USA point of view, it is probably possible to win the trade war and lose on your investments. How is that possible?
Win the Trade War and Lose on Your Investments
An article in Market Watch caught our eye. They note that a trade-war win might not be a victory for the stock market!
Sometimes losing can pay dividends in unexpected ways, and that seems particularly true in the case of stocks and trade.
For the past five decades, the U.S. stock market has comparatively outperformed when the trade deficit widened and vice versa, suggesting that even if the U.S. emerges victorious from its trade war with China, investors may have few reasons to rejoice.
At face value, it may seem counterintuitive, but for the U.S., which relies on trade to fuel its economic juggernaut, a deficit can actually be a sign that all is well.
They provide a graph that demonstrates how this has worked since 1970.