The impact of the trade war on the US stock market

After the first wave of flight from risks on the data on the escalation of the trade conflict between the United States and China, investors reduced the pace of flight and took a position of waiting about the dollar and the market in general. They also continued to sell risky assets and the Chinese yuan, in fact, having exhausted the main fuse. So they moved to passive-negative moods.

Expectations from the US-Chinese trade war can be found in the article “Escalation of the US-China Trade War and What It Means for the Market.” This article focuses on the dynamics of stock indices and the stock market as a whole.

World Stock Indices

After Trump’s first threats to continue raising duties against China, global stock indices came under considerable pressure. China’s intentions to introduce equally significant response measures increased pressure on the indices. In fact, this caused a state of panic in the stock markets. At the same time, from time to time, rays of optimism slipped on the market. They are associated with evidence that trade negotiations between the US and China continue.

But, despite the belief in the best, neither the Trump administration nor the official representatives of China are ready to state with complete confidence that the US-China trade agreement will see the world.

In conditions of maintaining a high level of uncertainty and the risks of exacerbation of a trade war, the stock market was under considerable pressure. This actually confirms the simultaneous reduction of key stock indexes: US DOW30, EU EuroStoxx 50 and China China A50.

Candlesticks – index DOW30, green line – EuroStoxx 50, blue line – China A50.

Under the conditions of existing risks, stock indices could continue to decline. If not for correction attempts. They were caused by technical correction, lack of drivers for pessimism, and even partial acting out of risks.

With all this, stock indices only retreated from annual highs, staying near the opening levels of March. Technically significant support for this year is at 2019 lows. It was formed on the New Year holidays due to the low activity and extremely low trading volumes.

Read: “Stock Indices: Storming the historic highs”

With all possible risks, the stock market and stock indices remain near historic highs. Technically, even without a trade war, the stock market was unable to update the highs without a proper correction. As can be traced in this situation.

Anton Hanzenko