Trade Negotiations: Investors Agree, the US Will Win
$DIA, $SPY, $QQQ, $RUTX, $N300, $VXX
- Trade disputes are good and easy to win.
- Chinese stocks weak
- American stocks stronger.
That is the view from financial markets as the tariff dust-up between China and the US shows increasing signs of impacting stock prices.
While broad measures of American equities have held up a whole lot better than their Chinese counterparts (it is off about $10-T, the market shows investors see some deep losses in some international industrial names.
When I compare the price action between Chinese equities and US equities, particularly the Russell 2000, it is pretty clear that the market is saying that the US is the winner, as the S&P 500 has absorbed the threat and blows much, much better than China.
We are estimating the full impact of all measures threatened by President Trump could shave up to 0.50% off of China’s economic growth.
Chinese stocks on the week
The Shanghai Composite Index (N300) plunging to a 2 year low and the RMB Yuan coming under pressure.
Friday, Shanghai at 2861.89, -0.48% tested at 2950 and came off from there. Support for the Chinese benchmark could see 2800-2750 in the next 2 weeks. We are Bearish while it trades below 3000.
Chinese technology shares, markes fresh lows relative to their US counterparts, this is a signal that investors anticipate more pressure within the world’s 2 largest economies’s trade negotiations, and will mean more pain for China.
While S&P 500 Index (SPY) finished Friday on a high note: S&P 500 +5.12 at 2754.62
A look at the DJIA (DIA) Friday, in that it just snapped 1 of its longest losing streak in 15 months, with Boeing and Caterpillar, 2 multinationals that get at least 10% of sales from China, accounting for the bulk of the losses on the Dow.
Expect the political rhetoric to continue to be market negative at least for the next few days as the the US and China continue to growl at each other for the benefit of domestic audiences and to convince each other of their seriousness and resolve the matter.
In the US investors are buying smaller companies with domestic focus.
The Russell 2000 Index (RUTX) is marking gainers in the scenario.
Notably, the ratio between Goldman Sachs (NYSE:GS) baskets of stocks with high international exposure Vs high domestic exposure is near marks not seen since the surprise election of Donald Trump spurred a strong run of out-performance for small caps as part of the America First move in markets.
|Strong: Energy, Materials, Consumer Staples, Utilities, Telecom Services, Real Estate|
|Weak: Financials, Technology, Consumer Discretionary|
Friday, the major US stock market indexes finished at: DJIA+119.19 at 24580.89, NAS Comp -20.13 at 7692.84, S&P 500 +5.12 at 2754.62
Volume: Trade on the NYSE came in at strong 2.2-B/shares exchanged
- NAS Comp +11.4% YTD
- Russell 2000 +9.8% YTD
- S&P 500 +3.0% YTD
- DJIA -0.6% YTD
HeffX-LTN’s US Major Stock Market Indexes Technical Analysis for the Week Ended 22 June 2018
America First and MAGA