Investing in the Electric Vehicle Revolution

So far, the US has imposed three rounds of tariffs on more than $250bn worth of Chinese goods. The duties range from 10% to 25% and cover a wide range of industrial and consumer items – from handbags to railway equipment.

What is the impact so far?

Both US and international firms have said they are being harmed. Fears about a further escalation have rattled investors and hit stock markets. The IMF warned a full-blown trade war would weaken the global economy.

How to Invest During a Trade War?

Goldman Sachs gave its take early last week, forecasting that services-oriented companies (think Amazon, Google, and Microsoft) that are “less exposed to trade policy” will likely have an easier time than goods-producing companies (such as Apple, ExxonMobil, and Johnson & Johnson) that are more vulnerable to trade headwinds.

The overall message is being balanced and diversified. Structured return products are also coming into their own during times of volatility.

High quality merchant bank are currently offering returns of between 6-12% USD

“It’s just important to have your risk controls in place to be able to weather the storm.”

Trade Deficit

Today statistics were released regarding the size of the current trade deficit – the catalyst for the current trade war.

It doesn’t appear to be going the way President Trump envisaged.

By the end of last year, China exported $324bn more in goods and services to the US than it imported.

That’s a record surplus, more than a quarter bigger than it was before Mr Trump came to power!

China Debt

Also the market appeared to express concern that China’s economy was slowing and that National Dept compared to GDP has mushroomed.

It has mushroomed in the last 10 years due to in the main part the construction of infrastructure spending.

Thousands of miles of new railways and dozens of new underground systems and airports constructed.

To my mind they are good things for a country to borrow money to do?

So called ‘good debt’

Debt as a proportion of the economy has soared, from 140% of GDP in 2007 to nearly 260% now.

Japan has 253% but the press don’t talk about it at all.

Greece 178.60% and seems to spend it on social welfare provision including allowing early retirement at the age of 50 for trombonists bakers, hairdressers and masseurs, who are allowed to retire early because of the nature of their work.

OK  – so may be they reduced this list of eligible people down to 100 in 2016 , but you get my point!

When President Trump send a tweet that upsets the market  – China tech mamoths such as Tencent and Alibaba seem to be affected.

Their business models are so diversified and their long term prospects they represent a great opportunity.

Holding them in a balanced fund such as the Fidelity China Consumer could be a good medium term hold.