Throughout many life circumstances, you’ll often hear the phrase “there are two sides to every story.” Usually, this is such an annoyingly accurate statement that you don’t need to repeat it. But in some situations, only one narrative is valid. I believe that’s the case for Bank of America (NYSE:BAC), particularly BAC stock.
Admittedly, this is a dangerous statement to make. Part of the reason why the market is so vibrant is because it’s a real-time debate. The difference, of course, is that the subject matter is money. Sentiment wins the battle, not fanciful rhetoric. And that sentiment can shift on a dime, sending your target equity to unexpected places.
Having said that, I think the only reasonable approach to Bank of America stock is the cautious one. But if I had to choose one direction or the other, I’d definitely go bearish.
That’s not a surprising take on the BAC stock price. After all, we have a raging U.S.-China trade war. Neither side shows any hint of acquiescence. President Trump is being unusually Trump-ish, sending out his daily stream of consciousness that seemingly taunts the Chinese. In turn, the Asian juggernaut has ratcheted up its own rhetoric.
For those hoping for some kind of resolution, I wouldn’t hold my breath. Advertising expert Tom Doctoroff once said regarding business relations with the Chinese, “respect for people’s feelings is paramount — this sensitivity that needs to be taken in respect to people’s ‘face.’”
When I read that quote, I laughed. Not out of disrespect, but out of morbid fascination with the train wreck about to hit Bank of America stock.
Recent History Provides a Gloomy Blueprint for BAC Stock
Investment advisors typically warn their clients that past results do not guarantee future performance. But with the BAC stock price specifically, I believe you can disregard that caveat: recent history tells you all you need to know about BofA’s future.
In the run-up to the 2016 election, then real-estate mogul Donald Trump railed against many people and institutions: the Federal Reserve, past administrations, Mexico, etc. Of course, one of his “favorite” topics was the Chinese.
But once Trump became president, he adopted a center-line approach. He even made progress with U.S.-China trade relations. Naturally, the BAC stock price ticked higher.
However, disagreements remained. Unresolved, Trump struck first on January 2018, announcing tariffs on “imported solar cells and certain washing machines,” according to CNBC. Subsequently, trading patterns for Bank of America stock went choppy. In April of the same year, China responded with their own tariffs, sending shares lower.
A war of words plummeted BofA as the markets approached the end of 2018. Suddenly though, Trump and his Chinese counterpart President Xi Jinping appeared to see eye-to-eye. That, in turn, helped swing Bank of America stock upward to cap off an otherwise bleak year.
Further talks and signs from the Trump administration earlier this year suggested a coming breakthrough. The big banks, which include JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), all moved higher.
Unfortunately, the Trump administration is like a box of chocolates: you never know what you’re gonna get. What was once pressing optimism has now turned into the black helicopters’ episode of Alex Jones’ Infowars.
To gamble on BAC stock here is to dismiss that shares have had almost a 100% correlation with geopolitical headlines.
Never Say Never, Except Now
True, the obvious risk to my bearish thesis is that Trump and Xi settle their differences. Such rapprochement would almost surely skyrocket Bank of America stock. But like I said before, I wouldn’t hold my breath.
To truly understand this trade war, you must appreciate the differences between western and eastern cultures. Asian countries take tremendous pride in their achievements, almost as if these accomplishments are forged into their blood. It’s hard for westerners to appreciate this because, excepting Hungarians, we’re almost always on a casual, first-name basis. In other words, we assess our successes (and failures) on individual attributes, not national or even racial ones.
Now, look at the trade war from the Chinese or Asian perspective. An arrogant white American embarrassed them on the global stage. It’s not that the Chinese are angels because deep down, they know they skirted international laws and customs. Rather, it’s the zero-sum game manner in which Trump prosecuted his case, offending the entire Chinese people.
That Trump would continue in his brash behavior completely ignored and disrespected China’s position as the No. 2 economic power. China can’t come to the negotiating table now because of these egregious insults … insults that would never fly there or anywhere in Asia.
If China can’t come to the negotiating table, then the trade war goes on. And with that, BAC stock goes nowhere but down.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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