Deal or no deal?
Last week opened with heightened trade tensions between the United States and its allies. It closed with the United States imposing new tariffs on $50 billion of Chinese goods. The Chinese declared it was the start of a trade war, reported
Financial Times.
U.S. markets largely ignored the potential impact of trade wars on multiple fronts.
Barron's reported the Dow Jones Industrial Average, which includes companies that are vulnerable to tariffs, moved slightly lower. However, the Standard & Poor's 500 Index shrugged off the possibility of trade wars, and the NASDAQ Composite gained more than 1 percent.
While
Barron's has written the largest risk to the U.S. stock market is the possibility of global trade wars, it appears many investors believe tariffs are a negotiating tactic.
Barron's reported:
"The market's apparent indifference suggests it doesn't see these tariffs as the reincarnation of Smoot-Hawley, but just the latest in President Trump's negotiating tactics. Moving away from his denunciation of Kim Jong-un as "Little Rocket Man" inviting "fire and fury" by missile launches, Trump last week declared the threat from North Korea neutralized. Similarly, many professional investors view the bluster on tariffs as part of Trump's negotiating tactics, rather than the start of an actual trade war."
News that monetary policy is becoming less accommodating in certain regions of the world didn't have much impact on markets either.
Reuters reported the Federal Reserve raised its benchmark rate 0.25 percent last week. The European Central Bank is ending its bond-buying program and gave notice it expects to begin raising rates next summer. The Bank of Japan is still easing.
There was a lot of red ink in Asian emerging markets. China's Shanghai Composite finished the week lower, as well. However, stock markets in Canada and Mexico finished the week higher.
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Data as of 6/15/18
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1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
0.0%
|
4.0%
|
14.3%
|
10.1%
|
11.1%
|
7.4%
|
|
Dow Jones Global ex-U.S.
|
-1.0
|
-2.6
|
8.3
|
3.4
|
3.8
|
0.4
|
|
10-year Treasury Note (Yield Only)
|
2.9
|
NA
|
2.2
|
2.4
|
2.2
|
4.2
|
|
Gold (per ounce)
|
-1.0
|
-0.9
|
2.5
|
2.9
|
-1.5
|
3.8
|
|
Bloomberg Commodity Index
|
-2.5
|
-0.5
|
8.4
|
-4.4
|
-7.7
|
-9.1
|
|
DJ Equity All REIT Total Return Index
|
-0.7
|
-2.0
|
0.3
|
7.5
|
7.9
|
6.9
|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
