Weekly Edge: U.S. Stocks Near Record Highs As Trade War Fears Fade

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Includes: DDM, DIA, DOG, DXD, EEH, EPS, EQL, FEX, FWDD, HUSV, IVV, IWL, IWM, JHML, JKD, OTPIX, PSQ, PY, QID, QLD, QQEW, QQQ, QQQE, QQXT, RSP, RWM, RYARX, RYRSX, SCHX, SDOW, SDS, SFLA, SH, SMLL, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SQQQ, SRTY, SSO, SYE, TNA, TQQQ, TWM, TZA, UDOW, UDPIX, UPRO, URTY, UWM, VFINX, VOO, VTWO, VV
by: Invest With An Edge

By Troy Tanzy

Co-authored by Daniel Rangel

The Trump administration announced this week that it levied tariffs on $200 billion of Chinese goods, adding to the $50 billion levied earlier this year. China responded by announcing plans to impose tariffs on $60 billion of U.S. goods.

The U.S. has now levied tariffs on $250 billion of Chinese goods, just shy of half of all Chinese imports in 2017 to the United States. President Trump has threatened to impose tariffs on the remainder of Chinese imports - valuing $267 billion - if China targets American farmers or industrial workers, The Wall Street Journal reported. China has imposed tariffs on $50 billion of U.S. imports, roughly 38% of imports from the U.S. in 2017. If China moves forward with the threatened $60 billion in tariffs this week, the total would amount to $110 billion, or almost 85% of the total value of U.S. imports to China.

Trade concerns are widespread and have affected global markets, especially those in Asia. Yet investors seem to be growing increasingly unfazed by the news. The Dow Jones, S&P 500, and NASDAQ all closed up on Tuesday (9/18) despite the tariff announcements.

Why aren't investors more concerned? Maybe they believe the outlook and consequences don't appear as dismal as they once seemed. Maybe news events are becoming less important than economic data, which would mark a sharp difference from the last couple of months. On trade announcements earlier this year, markets were roiled as investors fled from stocks that could be affected by tariffs.

Whatever the reason, concerns over the trade war appear to be fading for U.S. investors. We will all be looking at domestic market performance if Trump follows through on his threat to place tariffs on the remaining half of Chinese imports. But will the markets even care?

Sectors: Among the Sector Benchmark ETFs, the average momentum score increased from 12.82 to 14.54. The sector scores were mainly up for the week. Energy and Industrials increased the most, up 11 points. Financials and Discretionary were down 4 points. Health continues to lead at 29, followed by Technology at 27 and Industrials at 25. Financials, Energy, and Telecom were at the bottom of the rankings. All of 11 sectors are "in the green."

Factors: Among the Factor Benchmark ETFs, the average factor score increased from 14.67 to 16.17. The scores were mainly positive for the week. Yield increased the most, up 5 points. Small Size decreased the most, down 4 points. Low Volatility leads the factors at 23 points, while High Beta remains at the bottom. All 11 factors are "in the green."

Global: Global Benchmark ETF momentum scores increased from -19.82 to -9.18. Global areas did well for the week. Japan increased the most, up by 19 points. Latin America lost 1 point for the week. The USA continues to lead the group, while China remains at the bottom. Only three of the 11 global areas are "in the green."