The economy may be driving the bull market in stocks, but President Donald Trump's trade policies are expected to hurt the portfolios of investors, according to a new survey by E*TRADE.
This week, E*TRADE Financial Corporation (ETFC) revealed the results of its "StreetWise" quarterly tracking study of experienced investors and found that 60% of investors polled believe the Trump administration's approach to international trade will hurt their investment portfolios. What's more, 60% of investors surveyed by the New York-based online brokerage believe that volatility is going to increase this year in the stock market.
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When it comes to trade policy under the current administration, uncertainty reigns supreme as President Trump goes after long-established allies, placing tariffs on imported aluminum, steel and other products coming into the country. The rhetoric ramped up after the G7 Summit in which Trump slammed Canadian Prime Minister Justin Trudeau and refused to sign the joint communique among the seven nations. Since then, President Trump held a historic meeting with North Korea's Kim Jong-un in which Trump said he would suspend military exercises on the Korean Peninsula and that North Korea will move quickly to dismantle its nuclear weapons program. Stocks have been holding up in the wake of that historic meeting.
Outside of trade, investors polled by E*TRADE said that the strong economy is driving the bull market, with 56% signaling that the economy is in good or great shape during the current quarter. Furthermore, 82% of investors surveyed think that GDP growth of 2% or more can be sustained this year and that the economy will be able to handle an interest rate hike this month. As for future rate increases out of the Fed, E*TRADE found that there is no majority view as to what happens next. Less than half of survey respondents think the Fed will raise rates a total of three times this year, while 40% think the Fed will raise rates one more time or not at all, and 13% expect the Fed to raise rates three more times.
"With the seemingly never-ending parade of geopolitical events and trade talks dominating market headlines these past few months, it's more than understandable that investors are less than united on where the federal funds rate will end up this year," Mike Loewengart, vice president of Investment Strategy at E*TRADE, said in a press release highlighting the results. "It's hard to parse out what could truly be a headwind or a tailwind. Yet more than anything, it's important to keep in mind that economic fundamentals appear to be as strong as they've been in years. Job growth is robust, unemployment is at its lowest level since 2000, and inflation has nestled in nicely at the Fed's desired rate. If this is our guide, it's hard to argue that the Fed will change course in any dramatic way as 2018 continues."