Now news has emerged that the US and China are both willing to enter talks to avoid a trade war, and this has given a boost to investor confidence and sent the stock market into a rally during Monday trading.
The threat of a trade war has hung like a cloud over the stock market in recent days. Investors fearful of a prolonged trade war between the US and China sold off stock and sent the market into another decline last week. This year has been marked by high volatility, and trade tariffs only made the situation worse.
Tech Companies Rally After News
Tech companies have been some of the strongest in the stock market, and they were some of the first to climb after news emerged that trade war tensions could ease.
Microsoft (NASDAQ: MSFT) went up nearly 8% on the back of the news, and currently sits at a value of over $94 per stock ahead of Tuesday trading. Apple Inc. (NASDAQ: AAPL) was also up almost 5% ahead of Tuesday trading.
These companies, which rely heavily on global revenue, were not alone in the market rally. Overall, the Dow was up 2.84%, the S&P 500 index by 2.72%, and the NASDAQ by 3.26%. Even global markets were improved, with the GlobalDow up almost .7%, signifying just how important the American economy and stock market is on the world economy.
Is The Threat of a Trade War Now Behind Us?
Make no mistake, a prolonged trade war would have an impact on US stock markets and markets around the globe. The aim for both China and the US is to minimize any impact of trade disputes on their financial systems.
At the end of the day, stock prices will largely be governed by the movement of stocks and investor confidence. The threat of a trade war could damage companies in the US and China, which could send investors scrambling to sell the stock of companies that would be directly impacted. Manufacturers and US based multinational software and electronics companies would be some of the worst hit if the US and China entered a period of ‘tit for tat’ tariffs.
The key trigger here was the government’s decision to place tariffs on aluminum and steel coming from China (and other trading partners). Although the outcome of these tariffs hasn’t been fully seen, we can safely expect that the two nations will come to agreements that help to alleviate future trade deficits and eliminate the need for protectionism and tariffs.
Investors are confident that both governments are committed to preserving strong trade, and for now this means that stock holders are benefiting from increased value. We’re only a quarter of the way through 2018, so anything could come. For now, the surge in the market is some of the best news that we’ve had in the past two months.
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