Trade optimism is higher than it’s been in years, with millions of investors around the world confidently placing their fortunes into the hands of the U.S. economy, confident that it will continue to produce gains for them for the foreseeable future. With a number of geopolitical tensions giving markets the jitters, however, there are reasons to believe that the current trading heyday we’re enjoying won’t last forever. All markets inevitably crash, so it’s worth asking how the stock market can weather some forthcoming political and economic events which could spiral out of control and evolve into crises.
Can the stock market maintain it’s thriving prosperity for long? Here’s what investors, legislators, and world leaders are concerned about regarding the future of the marketplace.
The trade war still looms above us all
One of the biggest concerns in the marketplace right now is how President Trump’s ongoing trade war with the Chinese will pan out in the long run. While the president infamously declared that trade wars were “good and easy to win” markets have been less than certain in his brash approach to geopolitics, with many investors and companies across the nation claiming that ongoing tensions with China have thwarted their otherwise pristine progress in recent years. American farmers in particular have been hard hit by the geopolitical tensions, though the ongoing trade dispute shows little to no sign of abating anytime soon.
That could be a byproduct of the president’s roughshod approach to diplomacy, wherein he bullies and blusters more than he offers comprehensive plans to achieve his stated ambitions. Furthermore, his meddling in the stock market has irked many major corporations, with companies like Amazon having infamously suffered at the hands of his volatile tweets. Most analyses surrounding these tweets argue persuasively that they only cause short-term volatility in the market, however, with most companies who have been the target of his ire recovering shortly afterwards when the media cycle focuses on something else.
Other geopolitical news has buoyed the stock market’s prosperity even as stories elsewhere have diminished it, too. The European Central Bank’s recent musings about stimulating the economy overseas could seriously brighten the prospects of American investors who have extensive holdings abroad, for instance. Similarly, many American investors are expecting the Federal Reserve to give in to the president’s pressure campaign centered on cutting interest rates, which could prove to boost the stock market even higher than it’s recently been.
Skepticism continues to abound
Despite the positive progress seen by some in recent trade talks, skepticism continues to abound when it comes to seriously resolving the geopolitical tensions between the United States and some of its major trading partners. While the spat with China is hogging most of the media’s attention, other serious disputes with partners elsewhere are going unnoticed by everyday people while still detrimentally impacting the prosperity of traders. India recently decided to escalate its ongoing trade war with the United States, for instance, in an example of how taking the offensive may not always be best for the long-term interests of the American economy.
With paranoia surrounding Brexit continuing to trouble British markets, too, some Americans are worried that it’s special partner in the international arena could prove to be a financial albatross around its neck for years to come. Brexit negotiations have largely produced little to no notable results, and fears that London could suffer have led to anxiety in international markets where British interests are concerned. While this is unlikely to severely and suddenly impact American prosperity, strong British trading partners who are free from political anxiety would be highly preferable to most American investors over what they’re currently grappling with.
The current geopolitical environment is ideal for scalpers capable of conducting a flurry of business in a short period of time. By capitalizing on market anxieties and the announcement of a trade deal, for instance, a wise scalper could earn a tidy profit in the stock market after buying low in the midst of a political crisis before selling high after government officials take action to soothe the market or disclose a newly-signed deal. It’s thus likely that scalping trading will remain profitable for as long as trade wars and market anxieties run rampant. Investors who tack in the opposite direction of scalpers and focus on major trades could find that volatile market fluctuations driven by politics render their investment strategy obsolete.
With the U.S. market having enjoyed nearly non-stop growth since the dreaded financial crisis of 2008, many commentators are openly talking about a forthcoming slowdown that could evolve into a global financial crisis the likes of which we haven’t seen in over a decade. No bull market can endure forever, after all, and geopolitical tensions don’t point towards favorable trading conditions anytime soon. Whether the stock market can maintain its vibrant prosperity may come down to political factors, and recent years have shown that there are plenty of reasons to be worried as far as international diplomacy and trade are concerned.