"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness; […] it was the spring of hope, it was the winter of despair.”
That quote from Dickens’ “A Tale of Two Cities” opens a missive from Hermes, the fund manager, that paints a rather bleak picture of the current economic and investment climate. It warns of “contradictory extremes” looming “as equally likely realities” and basically suggests that we fasten our seat belts.
On a day when a supposedly business friendly US President has chosen to kick American businesses where the sun doesn’t shine by ratcheting up his trade war with China with threats of yet more tariffs that advice would seem sound.
The two are currently engaged in a destructive game of tit for tat. However, the trade imbalance between them means that all US imports into middle kingdom will soon carry some sort of punitive tariff. After that, China will have to turn to other means of making life difficult for American businesses. It doubtless will because it has to.
Remember the “Trump bump” when Wall Street and the American business community were drooling over the Donald’s tax cutting plans? At this rate it’s going to turn into a Trump slump. The trade war will obliterate any claimed economic benefits from it.
As ever, the lesson is that you should be careful what you wish for.
It is richly ironic that the man who famously penned “The Art of the Deal” doesn’t appear to have left any space to do one with China.
Perhaps at some point the two countries sit down across a table and find a way out of the mess they’re creating that somehow enables both to claim some form of victory. But you'd have to be the sort of optimist that thinks England can win the World Cup to see something like that emerging in the short term.
In the meantime it’s the rest of us that will lose. The creators of this situation are far better equipped to deal with it than almost anyone else.
It was ever thus and the next few months on the markets are probably going to resemble one of those extreme rollercoasters theme park operators like to throw up to draw in custom from crazy adolescents.
Talking of crazy adolescents, you might think that Brexiteers would reflect on the fact that now is not a good time to be stomping all over Britain's allies. Sadly, sober reflection and pragmatism don’t exactly characterise their tribe. They are Trumpkins one and all.
They are contributing to the volatility and crisis that is the new normal. As people wake up to that, they might start to realise that they used to have it rather good.
Some clever traders will doubtless make fortunes, but there aren't many clever traders and the losses will be far greater.
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