Investment Strategy
by Larry Adam

Weekly Headings

May 17, 2019

Despite the ongoing ratcheting up of tariffs between the U.S. and China, we remain in a negotiating window before those tariffs actually take effect. Assuming the approximate three-week transit time between goods leaving China (via ships) and arriving in the U.S., and China’s stated June 1 implementation of tariffs on $60 billion worth of U.S. imports, the clock is ticking as these increases become unavoidable around June 1. Outside of the long-run structural benefits of establishing a fair trade agreement between the two largest economies in the world, there are two other short-term dynamics that could accelerate the progress of an eventual deal: the stock market and the economy.

Bottom Line: Our base case remains that some form of a deal will ultimately be signed as the “no deal” negative consequences to the equity market and economy are too dire, given that both are important to President Trump’s re-election bid. However, the ebb and flow between “deal” and “no deal” are likely to keep markets on edge. As we wrote in our publication Tariff Tug-of War (May 13), levels of the market are important. Given that our earnings estimates ($166 in 2019 earnings) and economic forecasts (very low probability of recession) remain unaltered as of now by this trade friction, we remain confident in our year-end target of 2946. As a result, at levels near 2950, the risk/reward is less attractive. However, at 2800 (5% upside) and 2700 (~10% upside) or below, the S&P 500 is more attractively valued and presents better buying opportunities.

U.S. Equity
Fixed Income

View as PDF

All expressions of opinion reflect the judgment of Raymond James & Associates, Inc., and are subject to change. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets or developments mentioned. There is no assurance any of the trends mentioned will continue or that any of the forecasts mentioned will occur. Economic and market conditions are subject to change. Investing involves risk including the possible loss of capital. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. Past performance may not be indicative of future results.

This site is published for residents of the United States only. Raymond James financial advisors may only conduct business with residents of the states for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact your local Raymond James office for information and availability.
© Raymond James & Associates, Inc., member New York Stock Exchange / SIPC. Privacy Policy

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.