For the short term, trade negotiations will have little or no impact on most investors, according to Sylvia Jablonski, managing director of capital markets and institutional ETF strategist at Direxion.
In the long term, tariffs imposed by the United States and other nations probably will add volatility to the ETF markets, added Jablonski during the Charles Schwab monthly press conference on ETF markets.
“Equity markets are resilient. They have remained unaffected by trade tensions. Trade negotiations and tariffs are built into the market for now,” said the executive of Direxion, a fund and ETF provider based in New York City.
“However, it remains to be seen what the long-term effects will be, [especially for] intellectual property and other things President Trump is trying to negotiate with China,” she added. Threats by President Trump to withdraw from various trade treaties also could increase volatility.
“In the short term, investors are at peace, but down the road the impact of these negotiations could bring volatility,” Jablonski said.
For the long term in fixed income, rising interest rates should prompt smart investors to capitalize on products such as reverse bonds, she added. Another opportunity can be found in growing sectors such as small-cap companies that are not impacted by trade negotiations. “There is always a way to generate alpha in sectors not correlated to the market,” she said.
Changes that were seen in the beginning of 2018, when there were inflows of investments to international equities, and in such things as precious metal commodities and industrials reversed themselves. Outflows were seen in the second quarter and beginning of the third quarter. The outflows were small, but noticeable, and possibly related to trade negotiations, said Heather Fischer, vice president of ETF and mutual fund platforms at Charles Schwab.