Weekly Edge: The Trade War Is In Full Effect

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by: Invest With An Edge

By Daniel Rangel

By Friday (July 6), U.S. and Chinese tariffs on $34 billion of each other's exports are anticipated to be in place. In the words of CNN Money, the U.S.-China trade war "is about to get real."

Around 800 Chinese products, including items such as industrial machinery, medical devices, and auto parts, would be affected, says CNN Money. China plans to counter with tariffs affecting 545 American items, including SUVs, meats, and seafood.

What does the U.S. hope to gain? Says CNN Money:

"President Donald Trump and his advisers argue the tariffs are necessary to pressure China into abandoning unfair practices such as stealing intellectual property and forcing American companies to hand over valuable technology."

This week's tariffs may be only the first shots fired in a longer-term battle. The Trump administration has plans to enact more tariffs if China continues to retaliate, which could lead to more economic damage for both countries.

Getting the two countries to the bargaining table may be a function of how long each economy can endure the pain and public outcry brought on by these tariffs. Even then, it remains to be seen what kind of deal could be made in this environment and with these two leaders.

Sectors: Among the Sector Benchmark ETFs, the average momentum score decreased from 7.27 to 5.72. The results for the sectors were mainly negative for the week. The largest gainer was Utilities, up 7. Real Estate is the leading sector at 28, followed by Utilities at 27, and then Energy. Defensive, cyclical, and sensitive sectors are down. Large jumps in Utilities and Energy were more than enough to balance the fall of 9 points for Discretionaries. Financials and Industrials continue to be at the bottom of the rankings. Eight of the 11 sectors remain "in the green" despite some sharp declines this week.

Factors: Among the Factor Benchmark ETFs, the average factor score decreased from 5.55 to 2, a 64% decline. Nine of the 11 factors were down from the previous week. Value, Small Size, and High Beta fell the most. Yield gained the most, up 3 points. Value and High Beta are at the bottom of the ranks.

Global: Global Benchmark ETF momentum scores were down for the week. The average score by country decreased from -17.73 to -19.09, a 7.7% decline. The top positions remain dominated by developed global areas, including USA and Canada. China lost the most, down by 12 points, as trade-war fears build. The struggling Latin America increased 13 points but did not move in the ranks. At the bottom are Emerging Markets, China, and Latin America. Only the USA and Canada remain in the green this week.