Politics Influencing the Stock Market: Indexes Slide Ahead of G7 Summit

June 8, 2018
833 Views

Politics and finance are two aspects of society that are closely linked. Decisions made at all levels of office can impact stocks, interest rates, and even home values. Today, we’re seeing the direct influence of politics as Dow futures are down ahead of the upcoming G7 Summit.

Here’s what the markets look like this Friday morning…

Markets Down Across All Major Trade Blocs

Starting with Asian markets, we can see that indexes have dropped by more than 1% in most cases. The Asia Dow was down 1.11% on Friday morning, while the Nikkei was down 0.56%. The Shanghai and Singapore indexes were both down more than 1%. Friday trading closed out in these countries with lowered confidence, which most analysts have attributed to the current political situation between the G7 countries.

In the United States, the Dow futures were down 130 points, however, the market will open slightly up on the previous day’s trading. The S&P 500 and NASDAQ are both down slightly, but both fall within 1% of the previous day’s trading.

European stocks are down ahead of the G7 summit in Charlevoix, Quebec. Investors in the U.K. and across Europe are worried that trade disagreements could continue and turn into a long trade war. America’s trade partners have already vowed to place retaliatory tariffs on American goods.

G7 Summit, President Trump is in a Difficult Position

President Trump is not backing down from his stance on international trade. Trump tweeted on Thursday night “Why isn’t the European Union and Canada informing the public that for years they have used massive Trade Tariffs and non-monetary Trade Barriers against the U.S. Totally unfair to our farmers, workers & companies. Take down your tariffs & barriers or we will more than match you!”

This tweet will be particularly worrying for investors, as it indicates that some aggressive moves may be made by America in the future. Analysts believe that the other G7 nations (Japan, Canada, Germany, France, Italy and the United Kingdom) will no longer try to charm the president into lightening his trade stance and will instead use extensive tariffs to retaliate.

Trump cannot simply revoke tariffs. The steel and aluminum tariffs have been a huge boost to industry in the U.S., however, retaliatory tariffs will damage the economy in other areas. This is why investors are so concerned, because it’s almost impossible to see which areas of the economy might suffer if the other G7 nations decide to carry out a prolonged trade war with the United States.

If you’re invested in the stock market, then current uncertainty could make it wise to hold your investments for the meanwhile. It could also create an opportunity to pick up growth stocks at reduced prices, depending on how the G7 Summit proceeds, and whether there are selloffs on any of the key exchanges.

 

You may be interested

Job Hiring is Picking Up as Employers and Consumers Gain Confidence
Economy
575 views
Economy
575 views

Job Hiring is Picking Up as Employers and Consumers Gain Confidence

Lamont J - March 29, 2021

The recent government stimulus for small and medium-sized businesses, personal stimulus checks, and declining Coronavirus cases, are all great news…

Fed Could Maintain 0% Interest Rate Until 2024
Economy
510 views
Economy
510 views

Fed Could Maintain 0% Interest Rate Until 2024

Adam R - March 26, 2021

The Federal Reserve is holding its target interest rate in a range of 0.00% - 0.25%, even while the economy…

Supply Constraints Could Slow the Home Market
Economy
582 views
Economy
582 views

Supply Constraints Could Slow the Home Market

Becky H - March 25, 2021

Low inventory has been a constant in the home market for more than a year. The supply of existing and…