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Goldman Sachs warns Apple’s profits could drop 30% on US / China trade war

Financial news wire CNBC is reporting that an analyst at leading U.S. investment bank and research house Goldman Sachs has a scary warning for any Apple shareholders.

According to CNBC, the analyst is warning that Apple’s profits could collapse by nearly 30% if China moved to ban its products in response to US President Donald Trump’s escalating tariff and technology transfer war.

The fact that Apple is reliant on Chinese consumers for much of its sales and supply chain manufacturing capabilities is no big secret though and the stock is already down around 10% since President Trump announced tariff hikes on China earlier this month.

Generally though it’s not a sound investing strategy to trade in anticipation of coming market corrections or events that you think could trigger a correction.

For example selling Medibank Private Ltd (ASX: MPL) or Commonwealth Bank of Australia (ASX: CBA) shares last week ahead of the federal election in Australia would have been an expensive mistake.

While legendary investor Peter Lynch is also reported to have said, “more money has been lost by investors attempting to anticipate corrections, than in the actual corrections themselves”.

Therefore while it’s possible there’s more short-term pain ahead for Apple shareholders, it’s still arguably the world’s best company and investors might be better off treating price falls as more opportunity, than risk.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.