A May Overview
The recent market correction does not necessarily come as a surprise. The markets were off to a white-hot start in 2019 and markets do not go straight up. We continue to believe the markets will trade higher by the end of the year, but our recent pullback has been driven by many of the international undertones from our trade negotiations with other countries. Here is a brief overview with where we are:
Japan – We currently have a $58B trade deficit with Japan and, as such, President Trump pulled us out of the Trans-Pacific Partnership. A recent meeting between President Trump and Prime Minister Shinzo Abe of Japan went well. The US would prefer a deal done with Japan as the China trade situation looks dire. Look for an agreement to be set up in August.
Canada/Mexico – The US, Mexico and Canada have reached a new trade deal that will replace NAFTA. This is good news for all countries. The new deal has only been accepted. However, Canada is moving quickly to ratify the pact and Mexico should follow suit.
China – This is the one getting all the attention, and it should. China is the second largest economy in the world, and they have a $419B trade surplus with the US. President Trump is playing hardball with China as recent negotiations fell through, and many US tariffs jumped to 25%. There is another meeting set up in June between the two economic superpowers, and it would certainly help the market condition if some inroads were made. The last thing anyone can afford is a full-blown trade war.