A trade-war truce could be good news for GE stock.
What happened
General Electric (NYSE:GE) stock had a great year in 2019 — its best year since 1982, reports MarketWatch, with GE shares surging 53% through Tuesday’s close.
But given that investors ordinarily want to buy stocks low, and sell them when they’re priced high, here’s a question: With GE’s stock now setting new highs, why are investors buying more today, and bidding up GE stock by another 5.3% (as of 3:20 p.m. EST)?
Image source: Getty Images.
So what
Possibly, this is because investors think GE is poised to reap even greater gains in 2020 as the U.S. calls a truce in its trade war with China.
On New Year’s Eve, President Trump announced that he plans to sign a “phase one” trade deal with China on Jan. 15. This would remove or reduce tariffs on some $275 billion or more in Chinese imports to the U.S., and open the doors to new agricultural products and other sales from the U.S. to China.
Now what
As it happens, General Electric does a lot of business with China already. Final figures for 2019 aren’t in just yet, but according to data from S&P Global Market Intelligence, fully $22.9 billion of GE’s revenue came from its “Asia” region, of which China is a big part, in 2018. That number was 19% of GE’s total revenue in 2018, and it was up nearly 19% from three years earlier, a sizable growth rate for revenue.
Overall sales at GE dropped 2% year over year in the first three quarters of 2019. While we don’t have all the data yet, I’d be willing to bet money that China, and the U.S.-China trade war, played a part in GE’s overall revenue drop. Should a truce be declared later this month, and trade with China boom, American industrial bellwether GE would almost certainly be a beneficiary — and that’s why investors are bidding up GE stock today.
