 trade war begins. Good day fellow investors! Welcome to the stock market news where we discuss what's going on and put a long-term fundamental perspective on it. So today we'll first look at the markets, what's going on, how different is the Chinese and the US market, why explain what's going on, then look at what can happen with the trade war that just started, what are the likely outcomes, what to do and conclude with something that allows Trump to do what he's doing and we'll see for how long will that last. Let's start. So very interesting the SAP 500 index despite everything, despite the turmoil, despite the war, is up over the last five days, even more over the last four days as there was a holiday, 3.28% year-to-date, everything looks good on the SAP 500. If we look it from a five-year perspective everything looks even better because the last turmoil of the last six months looks just like a blip in the long-term trend. So all good, everything perfect. However if we look at the Chinese stock market index it is down 3.52% over the last week and 19% over the last six months and from the peak in January 25th of January we are more than 20% down which means that the Chinese market is in a bear market. How come that the second largest economy has its market drop more than 20% and the largest economy sees a good market growing market positive green numbers? How is that possible? Well first the US economy is doing really good, the news are really strong, the GDP expectations are strong and everything looks good and that's why Trump can engage in a trade war because things are going good, are going well in the country. If we look at the Bloomberg consumer comfort index for incomes over 100,000 we see that it is higher than it was in 2007 and much, much higher than it was a few years ago. So people in the States are extremely confident about their lives, about their jobs, about their economy, about the country, about everything. When that happens they are likely to spend, they are likely to push the economy forward and that's why you see good jobs numbers, low unemployment and a very very positive environment. So as long as that remains the case in the US Trump can really push on the trade war because then the short-term gain is higher than the long-term pain and as longer as the gain is bigger than the pain Trump can really push on then those trade wars can really renegotiate the way the world looks now. So that's what he's been pushing on, that might be his plan all along lower taxes, increase the power of the economy so that I can leverage on other things. For now it looks like the plan is working really well. However there is already some pain coming around. Iowa farmers are uneasy with trade wars, export tariffs, on pork, on soybean, from China, Chinese retaliation so that's something dangerous that might increase the pain and then might also make things much more difficult for Trump. Another very interesting thing is that about 40% of the sales of the companies in the SAP 500 and an estimated 60% of the sales growth come from overseas. Sooner or later as the Chinese market is already impacted as those tariffs will create a burden to the global economy also companies will see lower revenues, lower earnings, lower hirings which will affect also the American economy. We have to see when will what factor emerge. For now Trump is leading, is winning, the economy is doing really really good but the pain is starting to grow especially now that China will retaliate and there is something more that we have to think about. When there was an issue with South Korea Chinese people simply stopped buying their products and here is a lot of shopping and they simply stopped buying in China Korean products so that is something that might happen also to American products because the Chinese people remember it's a communist country, it's a different country than what we are used to. And also the Fed in their minutes discuss how plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy. And others in the steel industry, aluminum industry had not planned any new investments to increase capacity. So these are also decisions for the long term that impact what's going on. Now what to do it's important to look at the short term as long as the economy is doing well as long as there is so much employment as long as the earnings are strong everybody will just blindly put money in the SAP500 index and the index will go up. As we see the Chinese stock market is different there is not so much indexing not everybody puts the money blindly into that and that one drops because of the fundamentals because of the risk of the trade war. That's not yet happened in the US so carefully watch how are you exposed what are the risks what are other opportunities and watch what's going on and watch the time when the pain becomes bigger than the gain at that moment in time also the American economy might be in trouble. But then Trump can again turn things around and again improve things so we'll see it's always that's why it's difficult to know what to do because we don't know what will Trump or the Chinese do or anything else might happen in the world. That's always a risk when investing so always look at the risk reward. However my concern is always fundamental long term why is the American economy doing so good the European the Japanese global economy why are they are doing so good because of the easy money total consumer credit those who are feeling so good now has increased 50% over the last 10 years so 50% consumer credit increase means that people are spending much more are much more easier spending at borrowing for spending so that's something that drives the economy and that's impossible to go on forever and we see how that consumer credit exploded over the last 30 40 years so that's my long term perspective we don't know where when this will turn but it has been very very dangerous in 2009 where you see this little downward drop and that was very very painful with the great recession so imagine what would another drop like that do similarly the federal that doubled more than doubled in the last 10 years so everything looks good yes because there is access to easy money and as long as there is access to easy money things might continue to look good but the Fed now we have seen the minutes they are raising rates in order to cool down the economy because if they don't raise them now they won't be able to lower in the next inevitable recession so short term short term everything seems to be concentrated on the short term but people do not think about the long term why because nothing has happened over the last 10 years and those who were buying the dips were completely right over the past 10 years but at some point I don't know when but it might happen so the only thing we can do is think okay what are what is the risk I can take so that my life doesn't change can I risk this 100 000 in the stock market or it's better to have them in a bank account at 1.5 or 2% or in a treasury where I don't risk so it's all personal and you have to see if you can manage the risk or not betting is never a good thing because you never know what and when will happen thank you for watching looking forward to your comments we are living in a very very interesting world so every Saturday you can expect the stock market news video on sunday we have a stock market analysis a stock analysis so please subscribe if you haven't and I'll see you in the next video