Last Friday, August 31st, Runnymede managing partner Andy Wang returned to The Reuters Building in Times Square to chat with news anchor Fred Katayama. In this segment, Fred asks Andy about a variety of subjects including trade talks, emerging markets, and why Runnymede likes service sector companies.
Trade Talks and Tariffs
A recurring concern this year has been the Trump administration's actions on global trade that include a proposed $200 billion in new tariffs on Chinese goods, auto and auto parts tariffs, and more North American Free Trade Agreement negotiations with Mexico and Canada. Wang said, "Any potential disruption to global trade, that's worrisome to investors. And that's why you see a negative market reaction." While US and Canada trade representatives continue negotiating a revamped trade deal this week, investors should take note of the timing whereby once Congress is informed of the President's intention for a new agreement, a 90-day waiting period must pass.
Strong Corporate Earnings
In the near-term, Runnymede believes it's more important for investors to focus on positive fundamentals. U.S. GDP is solid with 4.2% growth through the first half. We've written about the strong corporate earnings season through Q2 and that growth is forecast to continue through Q4.
When asked about what companies or sectors Runnymede likes, the simple answer is companies in the service sector. It's the largest and fastest growing sector of the U.S. economy. Further, service companies have advantages over manufacturing companies because service sector companies require less capital, often have recurring revenue models, and therefore can produce consistent earnings growth.
How do you feel about potential trade wars and the risk to financial markets?