What's Really Going On With US Stocks and China Tariffs

 Trade talks between the US and China are once again trending in the markets, this time pushing the markets upward. Now, Goldman Sachs Research confidence suggests that the S&P 500 Index, which tracks 500 of the largest US companies, will go up 11% over the next year to 6,500, mainly on the back of better trade relations and the chances of lower tariffs.

Tariffs are taxes that governments put on imported goods. If the United States levies tariffs on Chinese products, American companies would have to pay higher prices when importing from China. Those companies could turn around and pass on the increased prices to the end consumers, absorb them themselves and hit their profits, or communicate these costs to suppliers. Investors are watching to see which companies will be hammered the hardest.

Recent earnings did look good; US companies saw profits grow by 12% year over year last quarter, but that was before the effect was being felt from the new tariffs was felt. The real test will come in the next quarter when businesses tell us how they are coping with rising costs and changing consumer demand.

Despite the uncertainty, many investors are still bullish on the US market. They subscribe to the idea of US exceptionalism, expecting that the US economy and companies will perform better than the rest of the world. But interest in global opportunities is growing. Some investors have started to send back their funds to Europe. In Asia, however, the US remains a strong attraction, with many investors there still considering the US a good place to make money.

When it comes to equity markets, the US still dominates, accounting for around 65% to 70% of the global stock market value. But for investors exploring opportunities elsewhere, does size and liquidity even matter as much?

Simultaneously, investors are looking at private markets. Private equity means buying a stake in a company. Private credit is lending to private businesses. They constituted an investment space reserved for large institutions and ultra-wealthy individuals in the past. Now, due to a whole slew of new investment platforms and advisors, more individual investors, especially those who are high-net-worth, are getting entry. Firms like Goldman Sachs are betting that this trend could pan out well to even the playing field.

All in all, the overall mood in the market is one of cautious optimism. Yes, there’s risk, especially in the case where trade tensions flare, mass or further tariffs are imposed. But something else very important does occur: investors simply will not back down from the challenge and instead face them head-on to weigh where real opportunities lie.