Yahoo Finance Seemingly bullish, this catalyst won't drive gains
With Japanese Prime Minister Shinzo Abe visiting the White House this week, the potential of new trade deals with the nations of Asia has become a hot topic of conversation on Wall Street.
Although no one is expecting a major breakthrough immediately, the markets always look ahead, and chatter suggests a pact could move stocks, sectors or the entire S&P 500 (^GSPC).
The anticipation is understandable. A so-called Trans-Pacific Partnership, currently under discussion, would bring together 12 countries -- including Japan and the United States – covering about 40% of the world’s economies.
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“Whether or not deals get passed (immediately), the tsunami of goods and services is much too powerful to prevent it ultimately,” said Zach Karabell, Head of Global Strategy at Envestnet.
However Karabell added that any deal to lift tariffs on US goods sold overseas should not be interpreted as a sign that America will again become a global hub of manufacturing again.
For better or worse, America lost its position in manufacturing decades ago. “It may have been a mistake to let it happen, but the mistake was made 30 years ago and it’s done,” Karabell said.
And he added, there’s more at play than just tariffs and quotas; part of our trade issues are cultural. “The Japanese have never bought a lot of foreign manufactured goods and I’m not sure a trade deal is going to turn Japanese consumers into buyers of American goods, instantaneously,” he said.
All told, Karabell does not see potential developments as a major long-term catalyst for industrials (XLI).
What's the bottom line? Keep an eye on developments, but, according to Zach Karabell, the knee-jerk reaction to think a pact would boost sales at multinationals could do more harm to your portfolio than good.
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