How the US-China trade war and Brexit are dominating investment markets – Episode 29 of Damien’s Midweek Markets
The 29th episode of my weekly Youtube show where I discuss what is happening in investment markets and what to look out for. Each show lasts between 5-10 minutes and is aimed at DIY investors (including novices) seeking contemporary analysis to help them understand how investment markets work.
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Investment markets analysis - 28th August 2019
Last time we focussed on recessionary indicators in investment markets and whether we could predict what might happen in the US-China trade war, specifically by looking at particular commodities.
How is the US-China trade war affecting investment markets?
Donald Trump had seemingly taken his foot off the pedal by delaying some of his planned tariffs, however on the 23rd of August things took a dramatic turn when Trump raised tariffs once again in response to China's proposed tariff increase on $75 billion US goods.
US futures indicated that the market was going to drop by around 3% when it opened on Monday but that didn't materialize largely down to Donald Trump talking up equity markets, claiming that China had called in a bid to re-energise the trade war talks.
The last couple of weeks has seen investment markets whipsawing, falling by 2% one day and then rallying the next. Just take a look for yourself on your stockmarket app and you can see the unusual pattern and yet we are still within touching distance of all-time highs.
What we are seeing is that despite the volatility we are seeing thanks to the trade war headlines, markets are range-bound. Take a look at the S&P500 and you will see that we are rangebound between 2,850 and 2,950, constantly going up and down and anyone trying to trade that will likely get caught out.
I talked last time about a particular commodity to keep an eye on and how it is a good indicator of global economic growth as well as an indicator of the likelihood of a deal between the US and China (if you want to find out what that commodity is then you should take out a free trial of 80-20 investor)
Interestingly, that commodity's pricing indicated that we were further from a trade-war truce than we ever were and showed that the global economy was slowing and it continues to indicate that the same is true now.
The VIX (often referred to as the fear index) has jumped back to the long term average of around 20, having reduced briefly to around 15. Bond markets are doing very well as is gold but yields are getting lower and lower and in fact the 10 year US treasury yield is down to 1.47.
Impact of Brexit on UK investors
For UK investors one of the biggest impacts on investment markets is Brexit with Boris Johnson asking the Queen to disband parliament early in an effort to force through a potential no-deal Brexit which has impacted the pound and it will be interesting to see how this develops in the coming weeks.
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