When geopolitical tensions flare anew, especially involving China, I seek insights from my cosmopolitan colleague Scott Chan.

Scott Chan (pictured here) is the lead analyst for Real World Investing and The Complete Investor. Scott also is a frequent contributor to our flagship publication, Personal Finance. I chatted with Scott this week about a range of topics, from the coronavirus pandemic to the U.S.-China trade war.

Scott Chan moved from China to the U.S. with his family at the age of 10. He earned undergraduate degrees from New York University followed by an MBA degree from the Zicklin School of Business at Baruch College.

Scott reads and speaks fluent Mandarin and Cantonese Chinese, skills that come in handy when trying to decipher the intentions of the world’s second-largest economy. My questions to Scott are in bold.

The coronavirus has damaged societies and economies in the Eastern part of the world a lot less than in the West. Why do you suppose that is? And how can investors profit from this regional disparity?

Countries in East Asia gained valuable experience dealing with SARS outbreak less than ten years ago. SARS was a similar but less virulent form of coronavirus. Their health care systems were better prepared and the Asian governments acted more proactively and decisively than in the West. Asian citizens also were much more vigilant about containing the spread right away.

For example, until our leaders started to recommend masks, you’d get weird looks in the U.S. if you wore a face mask in public, but it’s commonplace to see people wear masks in public during normal times to try to stop the spread of even the common cold. America simply got a late start.

Even the CDC was not recommending wearing masks in the beginning. As far as the stock market was concerned, it wasn’t until case numbers exploded overnight in Italy and Iran that the CDC realized that the pandemic threat was real. Although even the experts can’t agree, it’s possible that there are at least two different strains of COVID-19, with the more deadly one affecting the West. It is believed that the U.S. strain came from Europe. If true, that would partially explain why Europe and the U.S. were hit so much harder.

Despite the recent Senate bill that could eventually force the delisting of U.S.-listed Chinese stocks, if you are looking for growth, I think investing in a few Chinese big-cap stocks is a good idea. That country already is growing again and it’s the biggest consumer market in the world. If the U.S. gets a change of leadership in November, tensions with China could ratchet down a bit.

The Sino-American trade war has reared its ugly head again, at the worst possible time. The latest U.S. threat involves the delisting on U.S. exchanges of China-based companies that don’t meet our accounting criteria. How seriously should we treat renewed tensions between the world’s two biggest economies?

The coronavirus originated in China and yet despite some struggles early on in Wuhan, China seems to have emerged relatively unscathed. There were only about 15,000 confirmed cases outside of Wuhan (which had about 68,000). No other provinces had more than 1,600 officially confirmed cases.

Of course, you can always raise doubts about the veracity of China’s reports, but even assuming China is under-reporting, it’s still highly likely that their number of COVID-19 cases are far less than in the U.S. In New York City (where I live), there are more than 208,000 confirmed cases. It cannot sit well with the Trump administration that China is already growing again while we are still fighting hard to contain the spread, so Washington is seeking new ways to punish China.

Shortly before the Senate passed the delisting bill, the Commerce Department announced a new rule that requires companies that use U.S. equipment to get a license before they can sell to entities on Washington’s blacklist. That bill looks to specifically forbid Taiwan Semiconductor Manufacturing from selling chips to Huawei, a way for the U.S. to catch up in 5G.

Then there’s the bill that seeks to force China to let the Public Company Accounting Oversight Board (PCAOB) inspect the audits of U.S.-listed Chinese companies. According to Alibaba’s (NYSE: BABA) CFO, there’s a continuing conversation between the SEC, PCAOB, the Big Four accounting firms, and China’s version of the SEC, so there could be some type of resolution.

In the long run I think the bill (assuming it becomes law) could turn out to be a good thing for Chinese stocks, because if they improve their transparency, they would have more credibility and that could draw more buying interest.

The following chart shows the huge degree to which Chinese companies have accessed U.S. capital markets:

But on the larger question of U.S.-China tensions, it’s not a good thing for anybody if trade relations deteriorate again. President Trump has hinted that he may undo the phase-one deal that took forever to make. I really hope that doesn’t happen, because as you said, this would be an especially terrible time to open that can of worms again. If the trade deal really unravels or if Washington levies new trade restrictions, expect stock market turbulence.

As the global economy emerges from the pandemic, do you expect a rapid recovery or a slower one?

According to a JPMorgan Chase (NYSE: JPM) report, historically after a recession that lasts about a year, it takes the U.S. economy about nine months on average to return to its previous level of output. This time around, second quarter real GDP will probably fall by about 40% (annualized) year over year.

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Even if reopening goes largely without hiccups, and the economy recovers nicely in the second half, real GDP for the full year will probably be down at least 5%. If U.S. real GDP can return to its previous peak within two years (i.e., by the end of 2021), it would be a win in my book.

Globally, whether recovery is fast or slow, I do expect it to be uneven. China was the first country to go into lockdown, but its factory output is already back to growing. Pre-COVID-19, China already was the world’s growth driver. Post-COVID-19, it’s likely to become even more of a growth engine.

Do you think the stock market has risen too far and too fast from its coronavirus lows? Or is the rally justified?

On the one hand, the market is supported by unprecedented levels of government stimulus. The massive drop in economic activity was due to voluntary shutdowns for health reasons, not economic factors, so at least some of the pent-up demand should quickly recover.

On the other hand, COVID-19 will permanently change the world in some ways. The way many people and organizations consume products and services, and conduct business, won’t be the same. The shutdown has also put many people in economic hardship, reducing their discretionary spending power. Moreover, despite the seemingly favorable May jobs report, many jobs have been permanently lost.

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I do believe the market rally has gotten ahead of itself. There will likely be some ugly economic data to digest before we are truly out of the COVID-19 hole. I do think there will be a correction, but I also wouldn’t be shocked if the S&P 500 manages to hold the 3,000 level for the rest of the year. It really depends on how well the economy recovers in the second half.

Unless you know you will need to withdraw money from your investment accounts, I think the best thing to do is just to stay invested in high-quality companies.

You’re the lead analyst at our trading service The Complete Investor, which has been heavily touting the outsized profit potential of gold. What’s the bull case for gold?

As TCI editor Stephen Leeb pointed out in a recent issue, gold, a universally recognized store of value, has been by far the top-performing asset since the end of the 1990s compared to other major assets such as stocks, bonds, and real estate. Gold tends to do well when there are deflationary or inflationary pressures.

During deflationary periods, gold serves as a safe haven for investors who want to lessen exposure to the stock market. Gold also benefits when governments have to resort to fiscal and monetary stimulus to fight off recession and in severe cases (such as recently), depression. Thus, with the return of ultra-low interest rates, and the implementation of QE and fiscal stimulus on a larger scale than ever before, the current environment is very favorable to gold.

During inflationary periods, gold’s appeal also increases because there’s a finite supply of gold, unlike paper currency, which a government can create out of thin air. Think of it this way: as inflation rises, the purchasing power of a dollar falls. But if you own gold, the value of gold in dollars will rise as well.

As we speak, Steve is working on a book about the very topic of gold. He will explain how the emergence of China and the developing world in the East impacts the global economy, how it could disrupt the current monetary system, and why that is very bullish for gold. The book will be quite an interesting read and it’s due out later this year. For anyone interested, keep an eye out.

What’s a major risk that investors are underestimating right now?

I’m concerned that inflation could be waiting down the road. It might be a little premature since we are still trying to get out of the economic fallout from COVID-19, but the outbreak caused massive disruptions to supply chains, on top of disruptions already suffered as a result of the U.S.-China trade war earlier.

Once demand starts to return to normal levels, I’m worried we could face supply constraints in many areas. We are already seeing some of that when we grocery shop. Plus, the level of fiscal and monetary stimulus is greater than even the extreme easy-money policy environment right after the Great Recession. All that money printing creates inflationary pressure.

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John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com