Market Overview

Dow, S&P 500 records belie festering fear that China and the U.S. ‘are on a collision course’

Is Wall Street ignoring the potential for simmering trade conflicts with China to intensify, upending the stock market’s newfound buoyancy?

It may be hard to fathom that consternation tied to President Donald Trump’s hard-line stance with China, Europe and other major economies may bubble up into something more severe for investors after the Dow Jones Industrial Average DJIA, +0.95% on Thursday booked its first record since Jan. 26, joining the S&P 500 index SPX, +0.78% and the Nasdaq Composite Index COMP, +0.98% both of which had already broken out of a lengthy downturn to notch their own records (as recently as Thursday for the S&P 500).

Although on some level the stock market’s climb to new heights represents a growing conviction about the U.S. economy, outweighing the threat that a Beijing-Washington trade fight could morph into the sort of a bellicosity that could disrupt global economic vitality, on another level a number of investors can’t shake a sense of unease about the current trajectory of tariff tensions.

On Tuesday, the Chinese government announced plans to impose new tariffs on $60 billion in U.S. exports, in retaliation to the Trump’s administration’s announcement that it was following through with an additional $200 billion in duties on China imports, with Trump adding that “if there’s retaliation against our farmers and our industrial workers and our ranchers, if any of that goes on we are going to kick in another $257 billion.” Both sets of tariffs are due to be implemented on Monday, decreasing the likelihood that the two economic superpowers would easily negotiate a way out of the tit-for-tat conflagration.

Although most assess that the current state of play between China and the U.S. on trade may result in a negligible hit to the U.S. economy (or the rest of the world, for that matter), the real threat may be a knock-on effect.

Dow, S&P 500 records belie festering fear that China and the U.S. ‘are on a collision course’, MarketWatch, Sep 21
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