The 2019 market rally has been impressive. Now it faces a big obstacle: trade.
“The big issue for the market right now is clearly the trade issue,” said Ed Yardeni, president of investment advisory firm Yardeni Research.
Back in December — the last time volatility was a major discussion — the market was sent into a panic over slowing economic growth, a hawkish Federal Reserve and unease of US-China relations.
Markets shot back up as those factors appeared to be addressed. The Federal Reserve under Jerome Powell adopted a wait-and-see approach and said it will hold interest rates steady. The global economic picture appeared healthier. And the Trump administration signaled it was moving toward a trade deal with China.
“There’s no question what the Fed has done as far as backtracking has been a major boost to the stock market this year,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
Then came higher tariffs.
“Markets were expecting there to be a deal,” said Adam Slater, lead economist at Oxford Economics. “I suspect they may have been overoptimistic on several fronts.”
A 10% or 15% correction is a real possibility if the trade war continues to escalate, according to Yardeni.
