The ongoing trade war between the US and China impacts everyone, cautions a leading financial expert.
But investors should not be too scared to look for investment opportunities, urges Nigel Green, CEO and founder of leading expat financial firm deVere Group.
Recently he has delved into what is happening between the US and China and has shared his insights in a new video.
“We all need to be concerned about the trade war between China and America,” said Green.
“It can affect our livelihoods, it can affect the stock markets and the investments that we hold. Property prices can even be affected by a trade war.
Trump ups stakes
“What’s happened recently? Well, US President Donald Trump has said he is going to up the stakes with China and increase the tariffs
“He also said he wasn’t sure about the American economy’s biggest enemy – was it the Fed or China?
“The markets didn’t like that escalation because trade wars unfortunately mean the global economy slows down
“If barriers are set up, it’s more difficult to trade, and when that happens, you get a slowdown of the world economy
“The markets didn’t like it and Trump’s Tweet on its own sent the markets down 2%.”
After a couple of days of reflection, Trump posted another Tweet.
Friend or foe?
“Perhaps he overreacted with his first Tweet, but his new Tweet said China had made a phone call. He said they want to negotiate and that they need a deal,” said Green.
“And the markets went back up again and, of course, everyone thought that was good until China said that they hadn’t made a phone call and the markets went back down again.
“We should look at that and be concerned, and rightly so, because an escalation of the trade war wouldn’t be good for anyone.
“What is going to happen? Well, America has an election coming up next year. You could argue that both ways. You could say Trump needs a deal but you can tell exactly from his Tweet. He said: ‘Whose the enemy, the Fed or China?’
“What he was really trying to do was put pressure on the Fed to reduce interest rates. Trump’s ideal scenario is the Fed reduces interest rates. That helps the American economy. And then he does a deal with the Chinese. That would increase the stock market, which would increase the global economy.”
Deal or no deal?
Whatever happens, explains Green, Trump would like the Fed and China to follow his plan.
“The one worry with all that is China might not want to do a deal. They’re getting fed up with Donald Trump and they’re people around the world that are perhaps fed up with Donald Trump,” he said.
“Maybe if they wait 12 months, the Chinese would not have to deal with Donald Trump if he failed to win the next election.
“I’m not sure they are going to bet on that and I suspect they would like to do a deal.”
Brexit is part of the equation, too, argues Green.
Brexit plays a part
“You have four countries in a circle – the US and China trade war, which affects Germany. Germany does a large amount of trade with China, so what’s happening is China’s economy is slowing down because of the trade war, which means Germany is struggling and is in a position where it has a technical recession. That means the economy is currently declining,” he said.
“That could be good for the UK because Germany might do a deal. There were signs last week that Germany could do a deal with the UK, which makes me more optimistic about a Brexit deal because Germany needs to do something with the UK, which is also one of its largest trading partners.
“You also have Donald Trump in the background saying to the UK come and do a deal with America.
“Because of this circle, you have to be concerned if you are investing money and want to make money in the current market.
Look for high dividend companies
“Remember that even if global growth slows down some companies will still win and these offer opportunities.
“For example, high dividend stock. Many companies offer good value, have good cash flows and pay good dividends.
“If the world economy slowed down, interest rates would fall. People would be looking for high dividend stock, and that stock would gain in value.
“What I am saying is don’t be depressed and be aware of what’s going on, but also be aware that there are always opportunities. A good financial adviser will put you in a position where you can find these good opportunities to take advantage of whatever is happening in the market.”