Stock Market: Trade War? What Trade War?

 (Drivebycuriosity) - US President Trump`s trade war against the rest of the world is going on. The tariff hikes on Chinese goods - and China´s retaliatory actions - are already hurting US manufacturing & farming. The trade war also slows China´s economic growth which is putting a break on the global economy and harms US exports further. But the stock market seems to ignore the trade war. The S&P 500, the gauge for the US stock market, is close to his all-time highs from July and gained 4% since last year. Too complacent? I guess not.

(finance.yahoo )

The data from the economy front show that the US service sector, which accounts for more than 80% for the US GDP, is still growing and seems to be unharmed. Retail sales, the engine of the US economy, advanced in August 4% since last year,  weekly jobless claims stay close to all-time lows and salaries rose about 3% y-o-y.  It seems that the economy is flexible enough to whether the trade war so far thanks to the ongoing new industrial revolution. 

There are also 3 tailwinds which are partly compensating the negative influence of Trump´s trade war: First, oil prices stay subdued. Today, Brent Crude - the gauge for the global oil market - hoovers around $60. Cheaper oil translates into lower gasoline prices. As a result the gasoline addicted US consumers - many live in the suburbs or on the countryside and commute long distances - have more money in their wallets which compensates partly for the higher prices for imported goods

Second: Interest rates are on a historic low. Companies & home owners need less money to pay for their debts and the extremely low costs for loans still inspire to invest. 


Third: Advances in Internet (cloud, 5G), mobile computing, 3-d-printing, robotics, nano- & biotechnology and other technologies are creating new markets, reducing costs & raising efficiency. 

If the trade war does not escalate and does not spill over into the whole economy these 3 tailwinds should keep the bull market alive.