Bet On Low-Beta ETFs As Trade Fears Escalate

Though U.S. and Chinese officials are scheduled to meet today in Washington for a productive deal, tensions flared up as China threatened to retaliate if President Donald Trump puts into action his latest tariff threat. Trump is seeking to increase tariffs on Chinese goods worth $200 billion from 10% to 25%, and "shortly" impose another 25% tariff on a further $325 billion of Chinese goods.

Beijing’s warning came following the reports that the U.S. Trade Representative's office filed an official notice of new tariffs that would take effect at 12:01 a.m. on May 10 if no new trade deal is reached. The Trump administration wants an agreement that will stop China's unfair trade practices, including theft of U.S. intellectual property and trade secrets, forced technology transfers and currency manipulation. China denies those claims but wants to maintain a good trade relationship with the United States.

The renewed tariff threat has resulted in market gyrations, making investors cautious in an improving economy. This is especially true as the latest bout of data indicates a strong economy, which bodes well for the stock market. The U.S. economy added jobs every month for 103 consecutive months, representing the longest-ever streak of job creation. The unemployment rate has dropped to 3.6% — the lowest in nearly 50 years — while wages rose at an annual rate of 3.2% in April, the ninth consecutive month of more than 3% growth.

Strong hiring and increasing wages will boost consumer spending and keep the economy on a solid growth path. The American economy expanded at a faster-than-expected rate of 3.2% in the first quarter of 2019, marking the best GDP growth to start the year since 2015. Americans are also feeling optimistic with consumer confidence rebounding back in April. Additionally, a surge in oil price and the Fed’s decision of not raising interest rates this year after seven hikes over the past two years also added to the strength.

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