Following a strong July, investors should feel cautious heading into August. Historically, it has been one of the worst months of the year for major indices, with steeper losses especially in mid-term years.
A day after the United States and China were pursuing talks to stave off a trade war, things have also started going haywire. President Trump is now planning to slap further tariffs on billions of imported Chinese goods, thus, raising the spectrum of a trade war.
Given the widespread uncertainty, investing in dividend-paying companies seems practical as they provide steady earnings regardless of the state of the global equity market.
Prepare for Grueling Times
Equities have, no doubt, been doing well of late. Major bourses have recorded the highest gains in July since the beginning of this year, mostly on strong corporate earnings. But, Wall Street’s rally is showing signs of weakness. After all, both Amazon.com, Inc. AMZN and Apple Inc.’s AAPL strong second-quarter earnings and an overall robust earnings season are factored in the current stock market movements.
Now, the obvious question is what will be the next catalyst for growth? The answer is there aren’t any. In fact, the Trump administration is expected to propose tariffs as high as 25% on $200 billion of Chinese imports, way more than the original proposal for 10%, a move that could ratchet up a trade war between the two most powerful economies. A full-fledged trade war could easily hurt business growth, spending and sentiments.