Stock Market Update: Don’t Let Wednesday’s Slide Scare You

July 12, 2018
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Every key index on Wall Street slide on Wednesday as trade fears boiled over again. This put an end to four straight days of gains and left some investors back in an uneasy position.

Trade disputes are continuing to create uncertainty in the market, but there is an expectation that the market will rebound yet again, as news emerges that the world’s largest trading partners could begin a new round of talks.

The U.S. and China Could Begin High Level Trade Negotiations

China and the United States are the world’s two largest traders, and in many ways the countries have something of a symbiotic relationship. Although there is a huge trade deficit with China selling more than it buys from the U.S., there is still the fact that many Chinese exports are in some way backed by or related to American companies. The trade deficit is therefore not as simple as it seems in pure numbers.

More importantly, the current situation can still be remedied, and tariffs could be dropped depending on whether the U.S. and China are able to agree on the terms. Negotiations between both countries broke down in June, but both the White House and Chinese officials have said that there is still room for discussion. Even after the latest round of tariffs were announced, Chinese Vice Minister of Commerce, Wang Shouwen, said that “When we have a trade problem, we should talk about it. We should sit down and try to find a solution to this trade problem.”

According to sources from Bloomberg, there is similar sentiment within the White House. Many investors have caught this news and are optimistic of tensions easing.

Slide Sell-Off Recovered in International Markets on Thursday Morning

Another positive sign for American investors is that global stocks quickly recovered on Thursday. Chinese stocks rose as the government called for calm on the trade front. The MCSI Asia Pacific Index (a regional benchmark) was flat on Thursday morning, but this is still more welcome than a negative result.

American stock futures were up ahead of Thursday trading.

As a Precaution, Be Prepared for Bad News

Although confidence is creeping back in, there is still an ever-present risk of the situation breaking down. The trade disputes have been ongoing for months now, and there needs to be a final resolution before full confidence can return to the market.

Investors at this stage are taking each week as it comes, but the reality is that the next round of rhetoric will always have the potential to unsettle the stock market.

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