Trump’s trade war vaporises all of Dow’s gains for 2018
THE MAJOR INDEXES RALLIED FRIDAY AND NOTCHED SLIGHT GAINS AS THE QUARTER CLOSED
The calm predictability that was the signature of the 2017 stock market has been replaced by the turbulence of the first half of 2018, with investors frazzled by the drum of trade threats between the US and China.
The once-preening Dow Jones Industrial Average has erased all of its 2018 gains and is bobbing close to 10 per cent correction territory, compared with its January 26 high.
Some would see the pullback as a buying opportunity, especially given that the economy is otherwise robust. The gross domestic product is cresting at $20 trillion (Dh73.4 trillion) any day. What’s an investor to do? Stay the course. Stick to your plan. Look long term. But the “headline risk” of presidential tweets, White House pronouncements and breathless policy leaks made for a pretty rocky second quarter. If not for the tariff talk, Steve Forbes said on Fox Business Mornings with Maria a few days ago, the Dow would probably leap thousands of points.
The major indexes rallied Friday and notched slight gains as the quarter closed. The bluechip Dow rebounded toward the end of a turbulent week, up 55 points at Friday’s close.
The Standard & Poor’s 500-stock index and tech-heavy Nasdaq Composite Index were positive in Friday trading, with the Nasdaq finishing up more than 6 per cent for the second quarter.
Most market watchers place blame for the bumpiness squarely on President Donald Trump, who ups the ante on tariff threats almost daily. “It’s all him,” said Ed Yardeni of Yardeni Research. “His tax cuts boosted earnings dramatically. But, on the other hand, his protectionism is a possible threat to the economy.”
Despite relatively blue skies, there’s plenty of other economic threats feeding into investors’ existing anxieties. Layered on top of the trade talk are the price of oil at multi-year highs, a strengthening US dollar, the Federal Reserve foreshadowing interest rate increases, and Europe’s economies slowing.
Even the halo over technology shares was shaky the last week of June, with the Nasdaq working through one of its worst weeks of the quarter. Throw in a national donnybrook expected over an empty Supreme Court seat, as well as a looming midterm election, and you have a nervous “investorate.”
Wednesday’s markets are a case in point.
The Dow swung 441 points on mixed messages bouncing out of the White House.
Trump’s trade adviser Peter Navarro told CNBC on Monday that “there’s no plans to impose investment restrictions on any countries that are interfering in any way with our country.”
Jamie Cox of Harris Financial Group said markets have been selling off because some companies have been warning that tariffs are going to hurt quarterly earnings, due this month.