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Long Story Short: Growth Worries Decline, Sending U.S. Futures Soaring
Are the Trade Troubles Coming to an End?
For the past two years, President Donald Trump has been battling China in an attempt to create a mutually beneficial trade relationship. The two sides have continued to create significant disagreements in this drawn-out dispute, which has caused issues for both economies. Yet the markets have surprisingly bounced back each time. The increase has spiked investors’ confidence, but they are still waiting on a final deal.
Positive Market Outlook. The continued tensions between the world’s two largest economies have created extremely volatile markets, driving investors away from risky assets. Although this battle has caused problems for everyone involved, the markets have bounced back once again. After encouraging data from China lowered concerns of slowing global growth, U.S. stock index futures soared. The majority of the market benefited from the increased consumer confidence, with stocks seeing gains all over the board. The S&P 500 was down last month but is now 4% away from exceeding its record high that was hit in July. Investors are keeping a close watch on the monthly jobs report, which could confirm another rate cut from the Federal Reserve.
Trade Tensions Troubling U.S. Economy. Newly released data shows the trade war is hurting United States factories. On Sunday, President Trump issued a new 15% tariff on consumer goods, and China retaliated by increasing tariffs on $75 billion of American products. The financial markets have been able to bounce back, but after new tariffs went into effect on both sides last week, the Pacific, a closely watched index of American manufacturing activity, fell from 51.2 to 49.1. This decrease signals a contraction in U.S. factory activity, which would be the first reduction since 2016. Wall Street’s three major indexes fell on Tuesday, and markets have struggled to stay in the money.
No Deal. Although the markets saw an increase, the United States and China have still not agreed on a deal. Both sides continue to add on tariffs and plan to wait it out. The Trump administration has been urging China for more than two years to make a deal, but the two sides continue to have disagreements regarding the terms. Since conversations between the two stopped in May, it has been strictly tariffing since. Currently, a deal seems far from certain, but investors are hoping for a cease-fire. The U.S. and China have discussed a meeting in Washington in September, and both will also be present at the United Nations General Assembly meeting later in the month.
Hanging On. The continued trade disputes with China have hindered the U.S. in continuing its largest economic expansion in history. The markets have held on and somehow stayed away from a recession, but they can only recover so many times. Manufacturing may be contracting in the U.S. for the first time since 2016, making a trade deal necessary for both sides. With the two largest global economies battling, the entire world is anticipating the next moves. Investors are hoping September’s meeting will end this mess and aid both sides in continuing growth.
https://www.reuters.com/article/us-usa-stocks/stock-futures-higher-as-robust-chinese-data-eases-growth-worries-idUSKCN1VP1KK, Uday Sampath Kumar, September 4, 2019
https://www.nytimes.com/2019/09/03/us/politics/trump-china-trade-war.html, Ana Swanson, September 3, 2019
https://www.washingtonpost.com/politics/2019/09/04/china-has-reasons-keep-fighting-trade-war/?noredirect=on, Thomas Gift, September 4, 2019