DALLAS (BP) — Current news of tariffs and trade disputes has added volatility to the financial markets due to the uncertainty it creates but likely will have little impact on long-term investors, according to analysts with GuideStone Financial Resources.
Despite initial concerns that the moves could hamper growth, global markets have generally continued to trade in a narrow range while investors evaluate other, likely more impactful, near-term economic developments.
Regardless of the economic news, GuideStone encourages long-term retirement investors to focus on their long-term objectives and not short-term headlines and social media posts.
“Sensationalist headlines meant to garner investors’ attention, such as Harley-Davidson moving some motorcycle production overseas, merely serve as a distraction to a long-term investment plan,” said David Spika, chief strategic investment officer for the Southern Baptist financial services entity.
“While these headlines increase volatility to the markets in the short term as investors seek to react for better or worse to such news, history shows that long-term investors who don’t try to time the market and its cycles are rewarded.”
The Trump administration has positioned the tariffs imposed or proposed against China, Canada, the European Union and other nations’ goods as an opportunity to address trade imbalances between the United States and other countries. Critics have contended that tariffs do more harm than good to American workers. Ultimately, though, the president is remaining true to one of his key campaign promises.
“The expectation from a data perspective,” Spika said, “is that the negative economic effects from the current and proposed tariffs are generally modest, as such tariffs are likely to have a minimal long-term impact on gross domestic product [GDP], especially when considering the broadly positive impact of the tax cuts.
“If one were to assume that the maximum amount of proposed tariffs was implemented, the hit to U.S. GDP would peak around 0.1 percent. However, there is a risk that a more negative result could occur if a more comprehensive trade war were to break out,” Spika said.
Many of the proposed tariffs may never be enacted, he noted, as negotiators work to level trade between the U.S. and trading allies.
“Market prognosticators always need something to worry about, and the current trade dispute is no exception,” Spika said. “To call it an all-out trade war at this stage is premature.”
Future global market performance expectations should be tempered not so much because of the concern around tariffs but because the U.S. is now more than nine years into the latest economic expansion — the second-longest peacetime expansion in the economy on record — and because of the financial tightening, including Fed rate hikes, Spika said.
GuideStone President O.S. Hawkins reiterated that retirement plan participants should never try to time the market, as it may undermine their long-term financial strategies.
“You can’t buy yesterday’s gains or sell yesterday’s losses,” Hawkins said. “The performance of your retirement account is based on the results in the markets going forward. It’s important, regardless of the headlines or the latest social media posts, to put emotions out of the equation and to focus on your long-term objectives. The markets have historically rewarded those with long-term perspectives.”