From the Desk of Mario Giannini | Market Update

Mario Giannini Executive Co-Chairman  
 

Mario’s latest update provides in-depth analysis of the current market environment in an effort to frame facts and discussion around economies and markets, including implications for the private markets.

Key Takeaways:

• The baseline 10% tariff remains in place and all its attendant costs. The inability to plan for business investment, the time spent on developing scenarios and the worry about increased costs and availability of goods will weigh on consumers and businesses globally.
• The most important trade relationship/issue in the world today is the U.S. and China standoff. If you are only watching one indicator, watch the Yuan-U.S. Dollar exchange rate. If you see the Yuan start to weaken, that is a bad sign for global economies. It will indicate the trade war with the U.S. will both intensify and last longer.
• There is a developing debate about the prospects of a recession in the U.S. and other countries. Right now, it is fair to say that, in most places, there are numerous sentiment indicators that show dramatic weakening of business and consumer views of the economy, but not much hard data to show economies are slowing down.
• We took industry groups and quantified the impact of tariffs on the companies over the medium term (a couple of years) by none, low, medium or high. Our analysis shows that direct, first-order impact is limited. Approximately 65% of portfolio companies reported no direct, first-order impact from potential tariffs. An additional ~30% of companies reported low impact (less than 10% effect on revenue or earnings). This is likely because the portfolio is local, and service-oriented in nature.