Tuesday, October 2, 2018

Could the US stock market become vulnerable?

US stocks managed to bank significant gains during the 2018 summer, although this was considered to be a historically bad period for stocks. The S&P 500 managed to break above the January high and got past the 2,900 figure.

Tech stocks and the Nasdaq Composite had been leading the market in terms of gains, with the Nasdaq reaching the 8,000 milestone.

With share trading so hot in the US these days, some analysts are beginning to ring alarms, claiming that “dark clouds” can be seen on the horizon. With that being the case, let’s see what will be the challenges for the US stock market in the last quarter of 2018 and what needs to happen in order to see a continuation of the impressive bull run.

US-China relation in the first place

What seemed to be just a tossing around is getting more and more serious. With a deal already reached with Mexico, one already in negotiation with Canada, with the EU expected to agree on a series of trade measures as well, it seems like the purpose of this trade debacle had China and its massive trade surplus with the US in the center stage.

This isn’t just about trade at all, is about who will be the next world’s dominating power. Share trading could become more volatile if the situation will escalate further. The China 2025 program seems to be one of the greatest threats for the US dominance, so President Donald Trump is determined to take whatever measures will be required.

US Stocks Trading

Source: pixabay.com

He recently stated that another round of tariffs on $267 billion worth of Chinese imports are “ready to go”. The next had triggered a short-term spike lower on stocks, showing that investors are really anxious about this trade dispute.

Almost two months ago, tariffs on $200 billion worth of Chinese imports were put under supervision, with the implementation date being expected this month. Which means those $267 represent other imports, bringing up the tariffs to almost all imports from China.

The US administration finds itself in a very delicate situation since the midterm elections are due to take place in November. A bad management could lead to the Republicans losing some seats in the Congress which will make it harder for the US president to go on with his agenda. Despite impressive corporate profits, politics and trade will again be on the center stage in the next few months.

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