Good morning. “We’re in uncharted, unprecedented, uncertainty” … so are the words of Delta CEO, Ed Bastian, as the company is joining others giving guidance that Investopedia classifies as “bimodal.” What does this mean? Some companies have habitually given “guidance” … but now are forced to give two different forecasts based on uncertain scenarios … recession or no recession. Such is where we find ourselves now as tariffs are announced (and changed) with increasing speed … forcing plans to be written with pencils having very large erasers. Markets are down today as one of the “Magnificent 7” stocks, Nvidia, fell victim to new government controls placed on semiconductor exports to China … which the company claims was a “complete surprise” … effectively banning the shipment of chips made exclusively for the Chinese market. In addition to this, tariffs on Chinese imports were bumped up to 245% following China’s recent “retaliation” and refusal to send necessary rare earth metals to the U.S. The trade war continues to expand. Not to be left out in all this is the WTO (“World Trade Organization”) which gave the view … reported by CNBC … that the outlook for global trade has “deteriorated sharply” due to the surge in tariffs … and the uncertainly brought on by the ever-changing landscape. Meanwhile, retail sales for March exceeded expectations … but some assume the reason for this is people wanting to get ahead of price increases … which many believe will occur. Still, the president has pointed out inflation growth has actually slowed … but it may be too early to celebrate this … pending the next few months of data. One other victim in all this … which may provide a slight benefit for our exporters … is the drop in the dollar … which, even without tariffs, make imports more expensive. But Americans traveling overseas might not be so happy about this … as their dollars have less value … raising costs when translated to other currencies. And let’s say this tariff battle continues? Who wins … who loses? There was a great 1983 movie titled: “War Games” … in which two countries battled (though it was “thermonuclear war”) and the computer concluded the ideal situation as “the only winning move is not to play.” ‘ But here we are … finding rhetoric increasing and tariff missiles now being lobbed by both sides (with more nations to join). Investors hope this ends soon and diplomacy can come to the table … … a table which, in all likelihood, was imported from China. Have a great day, Joseph G. Witthohn, CFA Have any questions? Please contact info@teamemerald.com
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