That was fast. Wall Street’s enthusiasm for the US-China trade truce has completely vanished.
The selloff wipes out a chunk of last week’s huge rally. The Dow jumped 288 points on Monday on relief about the ceasefire between the United States and China on trade.
But investors are quickly realizing that the US-China trade war is not over. The tariffs already put in place remain. And new tariffs could be implemented if the two sides fail to make progress.
« People are still very concerned about the trade war, » said Dan Suzuki, portfolio strategist at Richard Bernstein Advisors. « Financial markets are increasingly showing signs of fear of a recession. »
The selling erased nearly $800 billion from the S&P 500’s market value, according to S&P Dow Jones Indices. Even though it was the Dow’s fourth-biggest point decline in history, the percentage loss doesn’t even crack the top 25 from the past decade. All three major indexes remain positive on the year.
Trade war fears persist
President Donald Trump did not help Wall Street’s trade war worries on Tuesday. Trump said that he would « happily » sign a fair deal with China but also left open the possibility that the talks will fail.
« President Xi and I want this deal to happen, and it probably will, » Trump tweeted. « But if not remember… I am a Tariff Man. »
Those words aren’t likely to bolster confidence among investors already worried about the negative consequences of the trade war. Steel and aluminum tariffs have lifted raw material costs and caused disarray in supply chains. And uncertainty about trade policy makes it very difficult for companies to make investment decisions.
« This tariff situation still looms large over the market, » said JJ Kinahan, chief market strategist at TD Ameritrade.
