Why is it that the biggest company in the world, Apple, is up 70% since January 1st? Have we priced in free trade, returning to the markets and removing such encumbrances from earnings growth? We haven't had any earnings growth in the overall market this year relative to last year. Have we collectively decided that this is about to change? And if so, how much of that is priced in here with the markets now at 18 times next year's earnings estimates? Are those estimates factoring in a strong, robust return to growth, or have they not really factored in the end of the trade wars?
Maybe we're all overthinking the trade and tariff issues. It's not that they're meaningless, of course, but maybe we're adapting to them with 451 of the companies in the S&P 500 delivering their third-quarter analyst conference calls, so far, 25% of those calls have mentioned tariffs. That is down 13% from the previous quarters.
Folks don't just sit on their hands waiting for a resolution. They start developing new supply chains. They look for other solutions for their businesses. American companies look for other places where they can manufacture those base goods cheaply, probably in other parts of Asia rather than China. And Chinese importers look to other places where they can buy their soybeans, rice, and sugar beets. The question that will loom here if this becomes more serious as more time passes is how permanent do these new solutions become? Are we able to reverse course and recover what's been lost? Or would potential relief result in a large release of capital spending and opportunity for upside?
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