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Trade uncertainty is 'squelching business investments,' JPMorgan strategist says

Heidi Chung

On Thursday, the highly-anticipated G20 summit kicks off a two-day meeting in Argentina, and all eyes will be on President Trump and President Xi Jinping as the two leaders meet to discuss trade.

Trade tensions have been running hot since Washington slapped another round of tariffs on over $200 billion worth of Chinese goods in September. But JPMorgan’s Chief Global Strategist David Kelly thinks the uncertainty surrounding trade is more of a problem than the tariffs themselves.

“The longer this thing is prolonged, the worse it gets for the U.S. economy, and the worse it gets for the global economy … The biggest tax levied by Washington is the uncertainty, and the problem is that businesses can’t plan, and that is squelching business investments,” Kelly told Yahoo Finance.

Kelly said that if the U.S. and China don’t reach an agreement, the consequences will seep into both the market and broader economy in 2019. “What’s got me particularly concerned is, right now in 2018, we’re on a sugar high of physical stimulus, and consumers had more money in their pockets. [In] 2019 we’re not going to have that. So if we don’t have some clarity on trade early in the year, I do worry that the global economy and the U.S. economy could soften.”

Even if there’s no agreement between Washington and Beijing, Kelly hopes that there will at least be an outline of how the two nations plan to deal with escalating trade tensions.

Despite the apprehensiveness surrounding U.S. trade relations, Kelly still thinks the bull market has  room to run. He explained that investors do not need to be fearful of putting fresh money to work in the market. “We know there’s a big question mark over trade, but when we get beyond that, if you look at it from a valuation perspective, stocks still look cheap … I’d still be a buyer of U.S. equities,” Kelly said.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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