China’s Bear Market Will Dictate the Trade War

The tale of the tape for both the Chinese and U.S. markets during the heated tariff skirmish is quite telling.

And since most investors are of the view that “the tape doesn’t lie,” it is revealing to see how the global market views the brewing trade war in terms of who wins and who loses. While both markets were clobbered back in February, when investors stepped back from stocks because of concerns that China’s economy was in danger of a major contraction, each country has taken a different direction since.

In the United States, rising bond yields, a spike in the dollar index and talk of the market being overvalued converged with fear of a slowdown in China. As a result, the U.S. market went down sharply.

The stock market decline at the start of February was swift and startling, a 10.16% fall in the S&P 500 over a nine-session span that ended on Feb. 8. This resulted in the market’s first correction — as defined by a drop of 10% or more — in two years. However, since then, the S&P 500 has stabilized and boasts a 4.78% year-to-date gain as of last Friday’s close.

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