Elementary, My Dear Investors: Toy Stocks Soar as Trade War Truce is Declared!

The Game is Afoot: A Curious Case of Market Merriment

The stock market that great cesspool into which all the loungers and idlers of the city are irresistibly drained has once again presented us with a curious anomaly. Following the temporary cessation of hostilities in the trade war with China the shares of our esteemed toy manufacturers have leaped and bounded like so many clockwork frogs! It would seem that the fear of exorbitant levies upon Chinese imports had cast a pall over the industry a pall now somewhat lifted revealing a glimpse of sunshine and dare I say profit.

The Curious Incident of the Tariff in the Night Time

President Trump's shall we say *robust* trade policy a veritable Gordian Knot of tariffs and reciprocal duties had threatened to unravel the very fabric of the toy industry. Imagine if you will a world devoid of Barbie and G.I. Joe replaced by… well I shudder to think! The temporary reduction of the 145% levy to a more manageable 30% has however provided a much needed shot in the arm a veritable elixir of life for these ailing stocks. Mattel Hasbro Jakks and Funko names synonymous with childhood joy (and of course shareholder value) have all experienced a surge of epic proportions.

Elementary Economics: A Matter of Supply and Demand (and Tariffs)

As Bank of America has so diligently pointed out both Mattel and Hasbro rely heavily on Chinese manufacturing sourcing approximately 40% of their U.S. products from the Middle Kingdom. Thus the imposition of tariffs those unpleasant financial speed bumps has a direct and palpable impact on their bottom lines. Hasbro for instance estimated a potential $300 million hit if the aforementioned 145% duty remained in place. One begins to see the method in the madness or perhaps the madness in the method. The situation is a three pipe problem no less.

The Retracted Guidance and the Lingering Uncertainty

While the recent rally has undoubtedly buoyed spirits a certain air of caution persists. Mattel citing 'macroeconomic volatility' and 'uncertainty surrounding U.S. tariffs,' retracted its earlier guidance a move that suggests a degree of trepidation beneath the surface. Hasbro while maintaining its full year projections has also issued warnings about the volatile trade environment. It appears that the game while temporarily in our favor is far from over. As I always say “It has long been an axiom of mine that the little things are infinitely the most important.” And in this case the 'little thing' is the ever shifting sands of international trade policy.

A Calculated Pause or a Fleeting Fancy?

The 90 day pause in tariffs is but a temporary reprieve. Whether this truce will blossom into a lasting peace or merely a fleeting fancy before the battle resumes remains to be seen. "Data! Data! Data!" I can't make bricks without clay and investors cannot make sound decisions without understanding the long term implications of these trade policies. One must consider all possibilities lest one be caught unawares when the tides turn.

No Comment: A Clue in Itself?

Curiously CNBC's request for comment from Hasbro Mattel Jakks and Funko went unanswered. Is this silence a testament to their cautious optimism or a sign of deeper concerns lurking beneath the veneer of market gains? Perhaps a new case is born a subtle puzzle that demands further investigation. The absence of evidence is not the evidence of absence after all. And in the world of high finance even silence can speak volumes.