Market chaos continues, but don’t allow it to scare you out of the stock market.
Sit tight and remember that the markets are resilient.
Once the panic recedes, buying opportunities can be found in the rubble, especially as the economy remains strong. In fact, private companies just added another 241,000 jobs in March 2018, as employment in construction and manufacturing skyrocketed.
That was well ahead of estimates for growth of 205,000 jobs, and it marks the fifth straight month that private payrolls topped 200,000.
At the moment, many investors are in panic mode with trade war concerns, causing the Dow Jones Industrials to open 510 points lower on Wednesday. However, it recovered to close up 232, the biggest intraday swing in history.
“While corporate fundamentals remain strong, markets are forward looking and the broadening scope of US-China trade tensions is seen as a growing threat to global growth and corporate earnings, forcing equity valuations lower,” said Alec Young, managing director of global markets research at FTSE Russell, as quoted by Market Watch.
China just threatened to impose tariffs of up to 25% on 106 American products, including soybeans, autos and airplanes. That comes after the Trump administration gave details on the $50 billion worth of Chinese goods that it plans to hit with 25% tariffs unless China makes major trade and investment concessions.
However, it’s not clear if the new tariffs will take effect at all, or if we’ll see watered down versions. Even Chinese Vice Finance Minister Zhu Guangyao noted that the period before the tariffs go into effect is the “time to negotiate and cooperate”.
Tommy Xie, an economist at Singapore-based bank OCBC, as quoted by CNN said it was unlikely that the latest tariffs from either side would come into force for another couple of months. But if talks during that period fail, then "the trade war starts," he warned.
As a matter of fact, the effective start date for the new charges was not announced, though China's Ministry of Commerce said the tariffs are designed to target up to $50 billion of U.S. products annually, according to CNBC.
In short, markets are reacting to threats that may never come to fruition.
However, savvy investors know that markets will overreact, and bargains can be found in that overreaction.
Stay tuned to The Cheap Investor for more.