Possible Causes For Last Week's Selloff

Despite the relatively strong earnings reports for the quarter to date, investors seem to be questioning the sustainability of the reporting companies to continue their strong results in the future. Several reporting analysts have suggested that the future guidance being given this year could be have been compromised by fears of trade comprises in the supply chain by the expanding tariff proposals.

 

Deteriorating relations with China due to tariff impositions could force some companies to seek new supply sources outside of China which would take time to establish, adding cost to the products and reducing future profit margins. Midterm elections have also be mentioned but I don’t see how that would impede trade at this point.

 

The prospect of rising interest rates could impact the cost of goods sold, cutting profit margins of our manufactured exports, creating an opening for other non-US suppliers. I also think that some investors seeing some of the headwinds forming decided to take their profits now and beat the crowd. I’ll keep looking for more concrete evidence, while the market has a  full chance to restore value and shrugs off just another correction.