• Inna Ri

U.S.-China tensions rise – Bill Ackman and others on how to view the market

By Keris Lahiff

U.S.-China tensions are again in focus after the U.S. ordered the Chinese consulate in Houston to close. China’s Foreign Ministry called the move an “unprecedented escalation.”

Four experts break down what it means for the market.

Billionaire investor Bill Ackman explains that he’s cautious right now.  

“We’re long-term bullish on markets. We continue to own the same positions we owned – Hilton, Starbucks, Lowe’s, Restaurant Brands. We invested subsequently $500 million in a real estate development company with major operations in Houston. Obviously, we are bullish on the country. But I would say I am cautious on markets over the next period of time, and we have today, a short position in a high-yield index. We are bearish on highly levered companies. to some extent, I view that as a hedge.”

Jim Cramer, host of CNBC’s “Mad Money,” lists the companies that could be vulnerable if tensions escalate.

“What I find is you’ll get some footing in the stock market, and it’s almost as if ‘OK, let’s use that footing to be able to trash the Chinese’ … China, I think we all agree, has been spying. I don’t think anyone disagrees with that. The British just cut out Huawei, but what worries me is we’re about to go into Apple’s earnings. And I don’t think the president has a view either way on Apple, but Apple, it needs China. And I think that Starbucks needs China, Nike needs China, all the usual suspects need China with the exception of Facebook and Alphabet.”

Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, sees one factor pushing Asian markets higher.

“What’s interesting about the Chinese tensions is the Chinese stock market was up [Tuesday] night. Taiwan was up [Tuesday] night, China, the Shanghai [Composite] is up 13% this month, and tensions certainly haven’t de-escalated this long. It’s the second best-performing market in the world behind the Nasdaq so something else is going on that’s forcing these Asian markets to do quite well and I think, while many are focused on politics, the issue is that the dollar is depreciating and that’s pushing money back into some many of these emerging markets in Asia.”

Paul Hickey, co-founder of Bespoke, sees a rotation in the market taking place.

“It’s more of, you know, gestures and theatrics of what’s going on here. And I think the market is looking past that and sees that … I wouldn’t read too much into it here as far as the overall market picture is concerned. We’re focusing on bigger things right now in the U.S. economy and the big question here is … ‘Do we want to stay in tech throughout this earnings season or do we want to rotate towards more cyclical plays?’ and I think we’re taking the view of the latter that we’re starting this week rotate out of technology and some of these high-growth areas into more of the reopening areas of the economy.”


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