By Nir Kaissar | Bloomberg January 11 at 5:00 AM
Investors in U.S. growth stocks have been richly rewarded in recent years, but their fortunes are set to turn if President Donald Trump can’t resolve his trade disputes.
Bloomberg News reported on Wednesday that China and the U.S. had wrapped up three days of trade talks and “expressed optimism that progress had been made.” For Trump, that’s a clear departure from his usual tough talk on trade.
That shouldn’t be surprising. As I pointed out recently, the president fancies himself a champion of American business and gauges his success by the level of the stock market. The market’s steep drop in December signaled that the country’s biggest companies, which dominate market barometers such as the Dow Jones Industrial Average and the S&P 500 Index, are under increasing stress. They generate much of their revenue overseas, so Trump’s trade disputes are an obvious concern.
If the president was hesitant to connect those dots, Kevin Hassett, chairman of the White House Council of Economic Advisers, was not. He told CNN last week that “There are a heck of a lot of U.S. companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China.” That was a day after Apple Inc. cut its revenue outlook, blaming in part weaker demand in China.
But Trump’s trade policies don’t affect all companies equally. Growth companies, or those that are expected to grow faster than average, sell more of their products overseas than slower-growth value companies. That means they have more to gain from free trade and, of course, more to lose during a trade war.
Consider that, on a weighted average basis, companies in the