Global Equity Markets Tick Higher Despite U.S. Proposing $200 Billion in Additional Tariffs
Sources: Sources for data in tables: Equity Market and Fixed Income returns are from JP Morgan as of 09/14/18. Rates and Economic Calendar Data from Bloomberg as of 09/17/18. International developed markets measured by the MSCI EAFE Index, emerging markets measured by the MSCI EM Index. Sector performance is measured using GICS methodology.
Global equity markets appeared totally indifferent to news that the U.S. was planning to impose additional tariffs of $200 billion on Chinese goods, as global equity indexes turned in impressive results for the week. For example, in the U.S., the S&P 500 Index pushed ahead to a level of 2905, representing a gain of 1.21%, while the Russell Midcap Index gained 0.29% for the week. The Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, followed the lead of its larger counterparts, returning 0.91%. On the international equities front, developed markets outperformed emerging markets increasing by 1.78% and 0.60% respectively. Finally, the 10 year U.S. Treasury yield settled at a level of 2.99%, nearly breaking the 3% ceiling that hasn’t been reached since early August.
This past week’s news cycle was undoubtedly dominated by the storm coverage of Hurricane Florence, but a few notable developments also garnered some attention and are worth reiterating. One such story to grab investor attention, and stimulate an overall sense of optimism, was news that U.S. and Chinese delegations had agreed to resume trade negotiations. This, of course, followed the U.S. threatening to implement tariffs on another $200 billion of Chinese goods. It is important to note, however, that out of the $781 billion in tariffs that have been proposed only $100 billion have actually been implemented thus far.
What’s potentially even more important is that $100 billion in imports only represents 4% of total U.S. imports. Nonetheless, Chinese officials have reportedly threatened to withdraw from negotiations if the U.S. moves ahead with the implementation of an additional $200 billion in tariffs. Our assessment is that U.S. Representatives understand the leverage they hold over the Chinese and are playing the long game. In other words, it shouldn’t surprise investors to witness negotiations once again fall apart, with the hopes that better terms will ultimately be negotiated in the future.
While we’re hopeful that the ultimate end to these tensions will be favorable to the U.S., and create a scenario more accommodative to global economic growth, there will undoubtedly be bouts of volatility in the interim. During such times, portfolio diversification can be important. As a result, we encourage investors to revisit the diversification that may, or may not, be in place within their existing portfolios. If you would like to learn more about how we are helping clients invest dynamically and consistently with their own goals, timeframe and tolerance for risk, please do not hesitate to speak with your Hennion & Walsh Financial Adviser.
Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion & Walsh cannot guarantee the accuracy of said information and cannot be held liable. This information is provided for informational purposes only and is not a solicitation to buy or sell any of the asset classes or sectors discussed.
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