Trading Cultures

August 7, 2019 - Published by IAG Wealth Partners

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The trade and currency conflict between the United States and China continues to escalate.

This appears to have grown into more than just a conflict over trade, but into a clash of distinct cultures that may make it more difficult than imagined to find an agreeable resolution.

American culture tends to treasure the concept of winners and losers. In business, politics, or any competition, Americans easily accept that the end result will have a winner and a loser. Americans thrive on the competition and use the fear of failure as motivation to improve.

Chinese culture tends to treasure the concept of social harmony. In competitive situations a positive outcome is one where social order is maintained and individual relationships are built regardless of the result. Chinese culture thrives on maintaining personal dignity and building respect.

Publicly the American trade talk strategy appears to be one of “we win, you lose.” Using tariffs, tough negotiating tactics, and aggressive tweets creates a competition where one party wins and the other loses. It is difficult to envision the President adopting a different strategy or tone going forward.

Publicly the Chinese trade talk strategy appears to be one of providing America with some victories while also maintaining some economic edges. They understand the President’s desire to celebrate a few “wins,” but also do not want to be viewed as completely surrendering to American demands. They also understand that they have far more time than the President to develop any agreement.

Given events over the last few days it is likely that this conflict will continue for longer than many expected and bring with it financial market volatility which could be unnerving at times.

It is days like these that reinforce our strong belief that investing in stocks is a long-term commitment that should not waver in the face of today’s negative headlines or pessimistic projections about the future of trade, politics, or economics. Successful investors have the discipline to ignore the alluring distortions of market fears and euphoria.

Our Portfolio SegmentationTM process isolates stock market volatility in our clients’ portfolios. We design our clients’ portfolio income so they have the capacity to withstand large stock market swings that last less than 8 years, but stock market downdrafts will always cause account values to decline until the market finds its updraft again.

Quote of the week: Jim Rohn: “Discipline is the bridge between goals and accomplishments.”

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Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein.

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