The Trade War Rages On
Updated: Apr 4, 2020
Last night, China’s central bank allowed their currency, the Yuan, to fall in value compared to the U.S. Dollar.
Why did they do that?
Because you can now buy the same amount of Chinese goods with relatively fewer U.S. Dollars, which partly negates the tariffs we just imposed on them. This move is supportive of their own economy.
What's the result?
When China did the same thing on August 24, 2015, it resulted in a 3.5% drop in the U.S. stock market (S&P 500) the same day. That’s almost identical to what we saw today. It's worth noting that the S&P 500 has produced a total return of approximately 44% since then.
What seems like a crisis today will almost invariably look like a buying opportunity in retrospect.
What should I do?
Potentially the smartest thing: buy stocks.
The reasonable thing: nothing.
Probably the worst thing: sell stocks.
Be cognizant of your Animal Spirits, but do your best to not act on them. Patience and prudence are almost always rewarded.
Want to talk about it?
Call me on my cell: 941.544.2269.
Text me: 941.877.6011.
C Garrett Moore, RFC®