The US stock market showed a sharp decrease on Monday after President Donald Trump’s threats about new trading rates, but managed to recover quickly after announcing the rates on Mexico for the time being. Investors on Wall Street seem to trust that Trump’s trade threats are mainly negotiation strategies and that the president does not want to cause permanent damage to the economy.
Tracking scholarships after the first panic reaction
The S&P 500 index opened with a loss of almost 2%, but managed to limit the blow to 0.9% against noon in New York. The Canadian S&P/TSX Composite Index initially dropped 3.1%, but managed to reduce that loss to 1%. The Nasdaq Golden Dragon Index, which follows American companies with large activities in China, even recovered completely and eventually was 0.3% in the plus.
According to Michael Bailey, director of research at FBB Capital Partners, investors were convinced that Trump played a political game and would not actually cause great damage.
Restore rate -sensitive shares and cryptomarket
Shares that are sensitive to trading rates were partly able to recover. Nvidia Corp., which previously lost 5.9%, limited the damage to around 3%. General Motors Co. Even recovered almost completely after an initial decrease of 6.3%. The energy sector within the S&P 500 also managed to turn an earlier decrease into a profit.
A similar trend was visible on the cryptomarkt. Bitcoin (BTC), which went below $ 93,000 for a short time, managed to recover strongly and was later above $ 98,600.
According to Scott Colyer, CEO of Advisors Asset Management, traders believe that Trump’s threats usually end in a deal, which means that there is still hope for negotiations with both Mexico and Canada.
Optimism on Wall Street despite trading insecurity
Although the markets remain careful, there are still optimistic signals. The American economy remains resilient, the Federal Reserve continues to relax the monetary policy and the company profits show strong results.
The Russell 2000 Index, an important indicator of small American companies, recovered from a 2.5% decrease to only 1.1% loss. Also a Goldman SACHS index of the most shined shares, including Roku Inc. And Peloton Interactive Inc., managed to limit the damage considerably.
Yet there will continue to be uncertainty. The CBOE Volatility Index (VIX), which measures market uncertainty, remained 15% above the annual average, which indicates that investors still take into account possible risks in the longer term.
According to Dennis Debusschere, main strategist at 22V Research, the situation remains uncertain:
“If the negotiations fail and Trump enters broad rates, the markets will again shoot in the ‘Risk-Off’ mode. But if these rates are ultimately not implemented, the ‘risk-on’ mood will return. It is difficult to predict how long this takes, it can take a few months before there is clarity. “
For the time being, the financial markets seem relieved that the trade war with Mexico has been postponed, but investors remain alert to further developments in the trade strategy of the US president.
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Source: https://newsbit.nl/wall-street-herstelt-na-uitstel-van-trumps-handelstarieven-op-mexico/
