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Investors should guard against tunnel vision on trade wars

NEW YORK — Once this trade-war cloud gets lifted, investors should have little to worry about, right?

Monday’s market action makes it seem that way: Stocks around the world climbed after President Donald Trump withdrew a threat to impose tariffs on Mexico, at least for now. That leaves investors hoping for a deal to soothe the more contentious and complex trade dispute with China, which helped sink stocks last month.

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But there are other concerns that shouldn’t be overlooked.

Economic trends were already signaling trouble before the latest round of tariff-induced fear. Friday’s surprisingly weak jobs report, where employers added far fewer jobs than economists expected, gave extra pause. Corporate profits are also under pressure.

If the administration fixes the problem it created, I’m sure there will be a short-term pop in the stock market, However, I believe it’s only short-term because ultimately that will not remedy the underlying fundamentals, which are just not strong.

said Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments.

Of course, many along Wall Street are still forecasting gains for stocks this year. Much of the optimism rides on analyst forecasts for profit growth to accelerate later this year. Plus, stock prices are looking like better values following their tumble in recent weeks. Perhaps most importantly, the Federal Reserve has intimated it may come to the market’s rescue again and cut interest rates if the trade war swamps the economy.

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