Wait and See on NAFTA Before Pouring Money Into Stocks

Trade talks have gone back and forth this year. It has seemed that whenever there are signs that trade talks are going in one direction - good or bad - they soon reverse course, and the U.S. stock market follows. 

Sure, that's mostly been the case with China trade relations. Just a few weeks ago it looked as if China and the U.S. would come to the negotiating table, but those talks were cancelled. Then Donald Trump put on 10% of tariffs on more Chinese goods. About a week later, he put tariffs on certain retail goods, impacting stocks like Walmart (WMT) , Target (TGT) , and Kohl's (KSS) . We haven't yet seen if President Trump will be as inconsistent on trade with Mexico and Canada, as he is with China. With his temperament, he could go back and forth, which could send markets back and forth as well. 

U.S. stock futures are rising Monday, indicating more gains for the Dow Jones Industrial Average. But investors shouldn't flinch much. While there's an agreement in place between the U.S., Mexico and Canada on a revised NAFTA deal, we don't know what the specific terms are and we don't know what will change as the agreement gets submitted to Congress for review. And, of course, if something changes, Trump's position could change just as quickly. 

Start, and end, your trading day right with TheStreet's 'Daily Snapshot' on your favorite smart-speaker. Learn more about TheStreet's market coverage for your trusted smart-speaker here.

Before investors pour more money into the market on signs of positive trade relations, it would be wise to wait and see what the actual terms of the deal are. What will this mean for U.S. tariffs on Canadian lumber? The tariffs on lumber have put pressure on housing construction costs, which have been passed down to the American homebuyer. Lumber tariffs have added about $9,000 to the average price of a single family house in the U.S., according to the National Association of Home Builders. If lumber tariffs are taken out of the equation, construction costs would come down, and it would then be wise to look out for some construction stocks like Toll Brothers Inc. (TOL) or KBR Inc., (KBR) , a construction company. 

We also don't exactly how the supply chain in autos will be impacted, which are almost sure to impact stocks like GM (GM) and Ford (F) . 

The key for the issue of trade relations: the U.S. midterm elections. As sources have let me know of late, there could be some volatility heading into the elections, as investors watch which candidates and which of the two major parties look poised for victory. The direction of trade relations between the U.S. and its major trading partners will hinge largely on which way political power shiftsfter the mid-term elections, so it might be wise for investors to sit on the sidelines for a short period before making decisions in their stock portfolios. 

Kohl's is a holding in Jim Cramer's Action Alerts PLUS member club . Want to be alerted before Jim Cramer buys or sells KSS? Learn more now.

Want to Buy Stocks for a 10% or Greater Discount? You can with certain so-called "closed-end" mutual funds - an often overlooked investment class. Click here to register for a free online video in which TheStreet's retirement expert Robert Powell and an all-star panel run down all you need to know.

More from Stocks

Verizon to Take Massive Charges From Employee Buyouts, Weakness at Oath

Verizon to Take Massive Charges From Employee Buyouts, Weakness at Oath

Wall Street Futures Jump Higher, Global Markets Rally on US-China Trade Progress

Wall Street Futures Jump Higher, Global Markets Rally on US-China Trade Progress

What to Expect From the Markets in 2019 According to an Abbott Downing Executive

What to Expect From the Markets in 2019 According to an Abbott Downing Executive

Tesla Bucks the Bear Trend, and Could Go Even Higher

Tesla Bucks the Bear Trend, and Could Go Even Higher

They Don't Make Stock Market Corrections Like They Used To: Market Recon

They Don't Make Stock Market Corrections Like They Used To: Market Recon