How the trade war became the stock market’s biggest driver

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Trade policy was cited in 26% of news stories about market volatility last year. That may not seem super high... but consider it was 2.7% from 1985 to 2015.

The study, by the University of Chicago’s Steven Davis, was circulated by the National Bureau of Economic Research and dovetails with a recent Federal Reserve publication.

Trade policy has become both more uncertain and more protectionist under the Trump presidency, Davis writes, and it has “a capricious, back-and-forth character that amplifies uncertainty and undermines a rules-based trading order.” ‘[T]rade policy went from a virtual nonfactor in U.S. equity-market volatility in recent decades to one of its leading sources in 2018.’ Steven Davis, University of Chicago That uncertainty undermines the economy “by leading firms to delay or [forgo] investments and hiring, by slowing productivity-enhancing factor reallocation, and by depressing consumption expenditures.”

Uncertainty about trade policy in 2018 only may have lowered aggregate U.S. investment by more than 1%, the Fed said.

 

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Don’t u think it was about time we , the USA , stood up & quit letting other countries take us to the cleaners on trade ? Finally someone not in the hip pocket of special interest groups is standing up for fair trade deals ! Thank u Pres. Trump ! 👍

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