What to think of US tariffs and Italian elections
5th March 2018 12:56
by Rebecca O'Keeffe from interactive investor
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Global equity markets are fragile, and investors are wary as the increasing rhetoric over the weekend on tariffs and a potential escalation of a full-blown trade war make it possible that things could get very ugly very quickly.
History has not been kind to investors during periods of protectionism, and recent tweets suggest that President Trump is leaning in rather than stepping back from threats to unleash a global trade war.
This all makes it very difficult for investors to know what to do. Any global company could instantly and significantly suffer if its principal products suddenly become subject to retaliatory trade restrictions.
Downside risks are, therefore, widespread and elevated, and it will be tricky to find sectors or companies that offer a genuine safe haven against such risks.
The major headache that the EU faces on trade is not the only issue facing European investors this morning as Italy looks to have taken a step to the right and moved towards populism and change.
The complexity of the Italian voting system makes it very difficult to establish what happens next and when, but neither of the anti-establishment Five Star movement or League parties are an attractive option for markets or the euro.
Against this negative backdrop, investors can only be grateful that German coalition talks finally reached a conclusion, with Angela Merkel managing to hold on to her position as long-serving Chancellor, albeit in a fragile alliance.
Source: interactive investor Past performance is not a guide to future performance
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