A “trade war” can best be described as the measures and effective countermeasures on import restriction and tariffs on imports that surge over time. A trade war causes trade between two countries to break down. When a nation seeks to provide a shield for its domestic industries and create jobs in the country, then a trade war often begins. We are currently living in an era of trade war.
(Before we continue let’s establish some definitions. When a I mention that something is “bullish” that means it is rising. If something is “bearish” it is declining.)
How a Trade War is Affecting Countries and Why Predictions are Bullish
The skyrocketing trade war between China and the U.S. has increased the roughness in the trade between these two countries and has ultimately raised the bearable attitude. But hopes still remain with some honored investment strategists. According to their predictions in 2019 the S&P 500 Index (SPX) will rise by approximately 25% to 30%. Although on the closure date, May 23, the gain of the S&P 500 was 12.6% year-to-date.
However, while the prediction of this gain seems to be smooth, the journey there can be rough. According to the calculations of Binky Chadha, who is head of asset allocation and chief equity strategist at Deutsche Bank, the S&P 500 will be at 3,250 by the end of the year 2019, an increase of 29.7% for the year. However, his calculations expect stocks to drop over the next three months before rebounding. To support his prediction, he says, “I am very much of the view that things need to get worse before they can get better.”
Another bull is acknowledged as one of the most precise forecasters on Wall Street, Marko Kolanovic. He is the global head of quantitative and derivative strategy at JPMorgan. According to his estimation, the year-end target of the S&P 500 Index (SPX) will be 3,000, or a gain of 19.7% for the year 2019. He believes that a successful trade commitment can drive the S&P 500 Index (SPX) to 3,200, up by 27.7% for the year.
Recently, the Market Strategist CNBC has organized a survey, the summary of which is listed below:
STOCK MARKET FORECASTS OF WALL STREET
(Closing Value of S&P 500 in 2019)
Most bullish: Binky Chadha (Deutsche Bank), 3,250 (+29.7% in 2019)
Average of 17 firms surveyed: 2,961 (+18.2% in 2019)
Most bearish: Two strategists at 2,750 (+9.8% in 2019)
Bears: Mike Wilson (Morgan Stanley), Maneesh Deshpande (Barclays)
S&P 500 closed at 2,822 on May 23.
Chadha does not believe that ascending corporate debt is an increased risk for the market. He says, ” GDP is outdated as a means for looking at corporate debt.” He knows well that U.S. companies have more global exposure today than in 1960. Based on the facts and calculations, he expects the next three months to be harmful to stocks before confidence in the market is restored. Effects are: signs of slowing U.S. economic growth and the long history of the market of 2% to 5% pullbacks every few months.