Despite growing tensions between the U.S and China, the Dow and S&P 500 continue to reach record highs. It would appear as if Investors have chosen to ignore the ratcheting up in the trade dispute between China and the U.S. With an additional worth of USD 200 billion of tariffs announced by the Trump administration this week, and China’s retaliatory tariff of worth USD 60 billion, intended to start September 24th. The Dow and S&P 500 have reached the all-time-high intraday earl trading. The Dow has risen 81points to 26, 738. While the S&P 500 gained points to reach 2,939.
However, to say that investors are merely ignoring the trade dispute news is an understatement. The fact is the economy is doing very well. With near full employment, annualized Q2 GDP growth at 4.2%, and manufacturing output rising 3.1% in August; the U.S. it is forecasted to be the fastest growing major advanced economy this year. Thus far, the economic data and corporate results have shown that the trade issue has had minimal impact.
Investor sentiment can be summarized by Plancorp Co-chief Investment Officer, Peter Lazaroff, who believes the U.S and China have yet to reach a “full-out trade war”. “At this point… since earnings and revenue growth are as high as they’ve ever been, it’s perfectly fair for stocks to be at records”. However, he also warns that due to the high valuations, the prospect of market pullbacks should be forefront in investors’ minds.