BFI Infinity Insights, Q2 2018 – Impact of “America First” Policies on Global Trade

The editorial below is from the latest BFI Infinity newsletter that was just published. On September 28th, major changes will go into effect in the Global Industry Classification System (GICS). Have you prepared your portfolio? Also, what can we expect from potential escalations in the current global trade tensions? In this edition of the InSights, you’ll find in-depth analyses outlining the investment implications of these developments and more.

 

With more than half of the year behind us, it has become clear that while equity valuations have overall still remained elevated and the macroeconomic landscape continues to be supportive, a healthy dose of caution has become essential. Over the last few months, we’ve seen meltdowns in emerging markets, the highest oil prices since 2014 and an internal political crisis over immigration in Germany that heavily bruised Chancellor Merkel’s European leadership status. Italy’s new coalition government has also helped to reignite tensions over the immigration issue throughout the EU.

 

However, the topic that has dominated the headlines is the escalating global trade tensions. Focusing on China, the EU, Canada and Mexico, the tariffs that the US introduced and the retaliations that followed have sparked serious concerns over the impact of an all-out trade war. In this edition of the InSights, we’ll take a closer look at the implications for investors and for the global economy at large.

 

We’ll also review another important development, that we feel has not garnered the attention or coverage it deserves. Come September, the US market’s sector classification system will undergo major changes, redrawing the lines for the Technology, Telecommunications and Consumer Discretionary sectors. With key players like Facebook and Alphabet changing teams, the impact of the reclassification is set to be considerable, especially for sector-ETFs.

 

Overall, we remain cautiously optimistic for the coming months. At this stage, the current tariff levels are unlikely to inflict serious damage to the US or its trading partners, and much less so on a global scale. However, all relevant developments must be closely observed, as further escalations could rattle the markets and trigger an economic slowdown.

 

Finally, we are very happy to announce that Daniel Zurbruegg, BFI Infinity’s CEO, will be visiting the US again from September 17th to the 21st with scheduled stops to include Florida, Tennessee, and New York. If you are curious to see if Daniel will be somewhere near you, let us know, and we’ll see if arrangements could be made for a meeting.

 

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