KINSTON, NY, 6 MARCH 2019—Despite the near daily proclamations from the mainstream media of the United States launching a "trade war" against China, there is no "war."
Beyond China, considering the size of the overall U.S. trade deficit which hit a record $914 billion in 2018, as we had long forecast, nations, including China, will negotiate with the U.S. to somewhat level the grossly imbalanced trading field rather than destroy their profit streams.
Further, the media noise that U.S. tariffs are responsible for China's slowing economy is unsubstantiated since the current U.S. tariffs cut only an estimated 0.7 percent from China's Gross Domestic Product last year.
The Chinese retail and auto sales slowdown has nothing to do with fears of a trade war, just as India's economy expanding at its slowest pace in more than a year or the recession in Italy has nothing to do with trade war fears. The world is experiencing a global economic slowdown and consumers have less money to spend.
After denying the truth for almost a decade, now even the mainstream business media acknowledge that world markets and economies were pumped up by cheap money. Economies did not grow as a result of basic economic fundamentals, rather they were artificially inflated by heavy doses of monetary methadone.
More artificial stimulus. The Federal Reserve did a U-turn on 4 January by reversing their aggressive interest rate policy for 2019, pledging to be "patient" in raising rates. Thus, since its 26 December 2018 low, the U.S. stock market rally is among the strongest since 1987.
As goes America, so too does much of the world. Globally, markets are recovering from their 2018 slump. Chinese stocks hit a nine-month high with the understanding the government will cut taxes, spend more on infrastructure and inject monetary methadone, to pump up the economy, which is on track to register its slowest annual GDP growth in three decades.
TREND FORECAST: In the lead up to U.S. 2020 presidential elections, should the economy dramatically slow and/or markets sink, the Fed will aggressively lower interest rates.
Absent a black swan geopolitical/economic event, gold will be confined to the tight trading range of the past 6 years.
Real Estate markets will remain stable in the U.S. and many nations as central banks lower rates to boost demand.
On the equity market front, again, minus a wild card event, we forecast modest growth with occasional sharp down turns.