A Trade War Will Leave Markets With Few Winners

In the childhood tale, Goldilocks ate the porridge, sat in the chair and slept in the bed until the bears showed up to settle the score. And so it was in markets last year, as each downdraft was followed by a stronger updraft as investors responded to economic and financial conditions that were just right. But this year, the bears have come home.

Equity markets have gone from placid to volatile, and “risk on” is no longer a winning bet. Strategies that generated winners in 2017 will no longer work. To paraphrase singer-songwriter Jimmy Buffet, there's been a change in latitude, so investors must change their attitudes. Make no mistake, the U.S. is now firmly entrenched in a trade war with China.