For several decades, the United States and China have had an active trade relationship, but in recent years, that relationship has been front-page news, as President Donald Trump has struggled to redefine the imbalance between imports and exports with the People’s Republic of China.
In the 2 ½ years of the Trump presidency, the trade relationship between the U.S. and China has been in flux. Either the two sides are planning to negotiate, or they are choosing not to negotiate. One side makes a statement and the other side responds. One side issues new tariffs and the other side does the same in response. Quid pro quo.
Few global relationships matter more than the financial relationship between the United States and China. China represents the world’s greatest producer of consumer goods thanks to a gigantic and cheap labor force. The United States represents the world’s largest population of consumers, thanks to a burgeoning economy and a massive population.
So, when talks break down between the two sides, the stock market reacts negatively. And when one side or another promises a new round of negotiations in the near future, the stock market reacts positively.
And investors try to determine the best way to respond.
Stock market fluctuations impact all sorts of investments, but their impact upon individual investors is most often seen in the mutual funds which populate the nation’s accounts. Younger investors have an opportunity to react accordingly; their portfolios tend to be more fluid, and changes can be made which have impact years in the future.
Older investors have portfolios which are much more static. They depend on their retirement income to varying degrees, and messing with retirement fund investment allocations is risky business.
There are other ways trade negotiations with China can impact Americans, from the cost of everyday products to employment issues. Advisors have the opportunity to offer reactive investment moves that will keep portfolios safe from a churning global economic argument.
As part of Spectrem’s monthly research with affluent investors, it regularly asks a series of Hot Topics questions which relate to current economic or investment issues. In August, investors were asked “Has your advisor reached out in the past month to discuss the ongoing trade dispute with China and it impact on your portfolio?”
The answers were revealing, if only because of the low level of communication between advisor and investor.
Retired investors were more likely to hear from their advisor than those investors who are still working. Twenty-two percent of retired investors heard from their advisor in the past month to discuss the impact of China trade negotiations, while only 17 percent of working investors got that call.
Of course, there is nothing preventing investors from calling their advisor, but knowing from Spectrem research that investors prefer proactive contact, advisors should consider finding out whether their investors worry about the negotiations.
More interesting, perhaps, than the higher rate of contact to retired investors is that advisors don’t have anything to say to retired investors about trade negotiations with China other than “sit still”.
Spectrem asked investors what advisors said to them when they made contact to discuss the ongoing issues with China, and 90 percent of retired investors were told to make no changes.
Advisors have the same advice to working investors, but not as often. Eighty-one percent of working investors said their advisor advised them to not react to the China matter, but 8 percent were told to sell securities in their portfolio that were vulnerable to results from the trade negotiations, and 7 percent were told to hedge any part of their portfolio that could be impacted. Also, 7 percent were told to purchase individual U.S. stocks in response to the trade war.
©2019 Spectrem Group
Keywords: hot topics, china, spectrem, investors, advisors, retirement, global