Wealth Management Blog | WrapManager | international investing

BlackRock Says Investors Should Prepare for Trade Wars, Not Panic

Posted by WrapManager's Investment Policy Committee

June 28, 2018

BlackRock Says Investors Should Prepare for Trade Wars, Not Panic

Trade Wars: Don't Panic, Prepare

Trade tensions are here to stay. Even without a full-blown trade war, escalating frictions could weigh on business confidence – and growth. Economic fundamentals are still running strong and underpinning our risk-on view in the short term, but we advocate building increased resilience into portfolios as macro uncertainty rises.

Economic tensions between China and the U.S. have shot up, confirmed by our BlackRock Geopolitical Risk Indicator. This has coincided with an out performance of quality stocks, as the chart shows. Investors appear to be heeding risks, trade included. Trade risks are not limited to China. The prospects of a North American Free Trade Agreement (NAFTA) deal have deteriorated. The European Union (EU) and others have retaliated against U.S. steel and aluminum tariffs, while the U.S. has threatened to impose tariffs on cars imported from the EU.

What History Tells Us about Tariffs and the Threat of Trade War

June 20, 2018

The Tariff Act of 1930, otherwise known as the Smoot-Hawley Tariff, was signed into law by President Herbert Hoover…even as nearly 1,000 economists warned of its dire consequences. The law slapped nearly 900 American duties on imported goods and was done in an effort to boost domestic spending and to protect American companies. Sound familiar? While virtuous in its design, the outcome of the Smoot-Hawley tariffs was far from virtuous. Instead of protecting the US economy, the tariffs arguably helped fuel the Great Depression. Back in 1930, European countries responded to the Smoot-Hawley tariffs by retaliating with tariffs of their own, creating an all-out trade war that produced no clear winners. The Great Depression left no part of the US economy unscathed. Fast forward to 2018, and we find ourselves in a situation somewhat similar to the one we saw in 1930, with the US threatening – or outright imposing – tariffs on some of our biggest trading partners, in an effort to protect American companies. There is little doubt amongst economists that China does, indeed, have unfair advantages and strict requirements for American companies doing business there. Change is arguably needed. The question is, will we have to endure a trade war to get it? [+] Read More

Stronger or Weaker Dollar – Which is Better?

June 13, 2018

The dollar debate between investors, economists, and politicians has been rolling on for years. Is a stronger dollar or a weaker dollar better for the US economy and the stock market? Doing research on this question will turn up views from every corner of opinion with no definitive answer. The reality: the dollar debate is complicated, and it depends on who you ask. Opinions within the current administration even appear to be somewhat split on the issue. Treasury Secretary Steve Mnuchin said in January that dollar weakness was “not a concern,” and President Trump has hinted in the past that he prefers a weak dollar. These views appear to differ from Larry Kudlow’s, who now heads the National Economic Council. Kudlow stated recently on CNBC’s “Closing Bell” that “a great country needs a strong currency” and that he favored a strong and steady dollar. So, which is it? [+] Read More

Understanding How the U.S. Taxes Foreign Dividend Payments: Doug’s Quiz Corner

April 13, 2018

How Do Tax Credits and Tax Deductions Work for Foreign Dividend Payments? Your friend Emily made an investment in the stock of a company that is based outside of the U.S. This investment was made in her taxable individual account. She received $100 in dividends for this stock (net of foreign tax withholding) last year. She had no other investments in companies outside the U.S. [+] Read More

In Their Own Words: Dorsey Wright Explains Selective International Investing Through Their Systematic Relative Strength Strategy

March 13, 2018

Although the US is arguably the largest and most diverse economy in the world, international diversification, where appropriate, might be to able help reduce the overall risk in your portfolio by investing non-correlated assets. While diversification does not guarantee profit or protect against loss in declining markets, international investing can be an important component of a well-diversified portfolio. [+] Read More