Inconsistency needs composure

US trade policy appears to be dominated by sentiment and electoral considerations and is characterised by a high degree of volatility. Within a few days, US President Trump announced tariffs of 10% on a volume of 300 billion US dollars and then partially postponed them again. To make matters worse, there was actually no reliable justification for either action. They appear to the observer as completely arbitrary actions of the US government or the president himself.

The financial markets, especially the stock markets, have reacted violently to both announcements. However, nothing should be interpreted into these movements. The economic outlook will not be changed by these erratic actions. However, the reluctance of companies to invest is likely to increase even further, as uncertainty about the further development of the trade conflict should deepen. However, weak investment and stagnating world trade are the main reasons for the slowdown in growth momentum. Both are unlikely to improve as a result of recent developments.

For investors, this means that we should see through this volatility. Corporate earnings are the sustainable drivers for the stock markets. The outlook here is rather bleak. Hopes that interest rates and yields will continue to fall can give rise to hope here, as the cost of capital for companies is falling and share buyback programmes are easy to finance. However, the expected positive effects are becoming smaller and smaller as interest rates are already very low.

One has to take note of the short-term ups and downs, but should not build medium-term decisions on them. Serenity is probably the right answer here.

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