Thursday, 20 September 2018 07:32

Why Investors Aren’t Scared of the Trade War

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One of the many factors that has been odd about the market’s rise since the beginning of summer has been how it did so at the same time as global trade tension was building. No better example of this odd pairing can be found than yesterday’s market—Trump imposed tariffs on $200 bn of extra Chinese goods, and the Dow rose over 0.5%. Why is this the case? Barron’s argues that it is because investors fundamentally believe that China and the US won’t let a trade war get out of control because of fears of mutually assured economic destruction. Accordingly, they see almost all negotiations and actions through rose-colored glasses.

FINSUM: We are not as sanguine as the market about the risks of the current trade war. Our biggest worry is not even about trade negotiations, per say, it is more about the ill will that is being built up which may create a future impasse on a seemingly resolvable issue.

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