The stock market has largely shrugged off the ongoing Sino-American trade war, but not David Tepper.
Hedge fund billionaire Tepper, who co-founded Appaloosa Management ($14 billion under management), said in a CNBC appearance Thursday that the trade tiff could harm the market if the conflict intensifies.
Since the trade standoff began in earnest, US investors have largely felt that the trade war wouldn’t get out of hand. This year, the S&P 500 is up a little more than 8%.
A new round of tariffs, which President Donald Trump has threatened Beijing with, could push stocks down 5% to 20%. The market dipped 20% last winter, constituting a correction, over worries about the Federal Reserve’s possibly pushing up interest rates too fast. Jeremy Siegel, the famed Wharton professor, sounded a similar warning last month.
“If we do the tariffs on China, that’s going to make it a little bit tough on the market,” Tepper said. “It is a little tricky at this point in time. … It’s a late inning game.”
So, as a result, Tepper said he has reduced his firm’s equity portfolio by some 30%. “I’m just not sure what’s going to happen with these tariffs,” he added.
The US and China have each imposed tariffs on $50 billion of each other’s goods, and the White House is considering another $200 billion worth. On top of that, Trump said last week that he is “ready to go” on $267 billion more in Chinese imports.
Thus far, the trade war’s economic impact has been more pronounced in China than in the US. Reason: China ships much more to America than vice versa, $505 billion yearly as opposed to $130 billion.