Can Trump Have a Trade War with China and a Booming US Economy?

NYSE: SPY | SPDR S&P 500 ETF Trust News, Ratings, and Charts

SPY – Today’s exclusive article highlights whether Trump could have a trade war with China and a booming U.S. Economy? Continue reading for more details.

This was expected to be a crucial week for the markets as the highly anticipated Fed meeting was supposed to provide clarity on monetary policy.  On Wednesday, Jerome Powell did give a 25 basis rate cut, the first over 10 years since the financial crisis.  

The market initially sold off as some had hoped for a 50-basis point cut and the promise of more, from which Powell demurred — by mid-morning Thursday stocks were hitting new all-time highs.

federal reserve target chart

Then Trump jolted the markets by tweeting without warning that he planned on increasing tariffs on China and escalating the trade war.  

The Dow Jones Average went from up 300 points to down 300 in a matter of minutes.  Stocks dependent on imports such as retail, especially apparel like Nike (NKE) & Ralph Lauren (RL) and technology stocks, like chip makers Micron (MU), were especially hard hit, losing 5%-10% on the day. 

The repercussions were also felt in the bond and currency markets across the globe.  The yield on bonds tumbled to lows as investors sought a safe haven in what is now expected to be a prolonged trade war and slowing economies. Yield on the U.S 10 Year Note sank to 1.85% today. 

What’s amazing is that its far higher than the rest of the developed world. 

Germany’s 29-year bond traded with a yield of minus 0.004% Friday as investors ditched risky assets including stocks and piled into havens like government bonds and currencies such as the Japanese yen and Swiss franc

In Germany now, every single maturity after yields on the country’s longest-term bond dipped into negative territory for the first time.

german government bond yields chart

Worldwide, there is now over $14 trillion, with a ‘T’, in negatively yielding debt. With investors now have the pleasure of paying governments for the privilege of holding their money, you know that something historical has taken place. 

If the Fed hadn’t cut short term rates the yield curve was in danger of inverting which has often signaled a coming recession.  Wednesday’s move by the Fed was also seen as peremptory in case trade tension mounts. 

Trump wasted no time in doing so as he seems to think the Fed will continue to cut rates to prevent a slow down that he himself is creating through the trade wars. 

Why does the inversion predict economic slowdown?  The thinking goes as we enter the late stage of the economic cycle, and recent signs such as a slowdown in housing and auto sales, and the decline in oil and copper prices, and overall slowing global growth, would warrant low long-term rates as investors choose the safety of bonds over investing in expansion.   

One big difference between now and past rate cuts to spur activity is that rates were already historically low; during the last inversion and cutting cycle in 2006, we saw the 10-year yielding over 6.5% compared to the current 2%, meaning even a slight inversion doesn’t create a huge change in the cost of money. 

Can Trump have both his trade war and a booming economy? I guess we will find out in the coming months. 




SPY shares were trading at $291.72 per share on Friday afternoon, down $3.12 (-1.06%). Year-to-date, SPY has gained 17.81%, versus a % rise in the benchmark S&P 500 index during the same period.

This article is brought to you courtesy of Stock News.

About the Author: Option Sensei

Steve has more than 30 years of investment experience with an expertise in options trading. He’s written for, Minyanville and currently for Option Sensei. Learn more about Steve’s background, along with links to his most recent articles. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SPYGet RatingGet RatingGet Rating

Most Popular Stories on

3 Safe Gold Stocks Pointing to Buy

Gold is often considered a safe-haven asset during economic uncertainty and is used as a hedge against inflation. Given a long-term robust outlook for gold on solid demand and rising prices, fundamentally sound gold stocks Alamos (AGI), Harmony Gold Mining (HMY), and Eldorado Gold (EGO) could be solid buys for steady returns. Keep reading…

Why the Bull Market is Still in Charge?

It’s been nearly 2 months that the S&P 500 (SPY) has been mired in a trading range. That is why investment veteran Steve Reitmeister shares his latest insights to explain why a bull market is still in place...and how to target the best stocks and ETFs for the days ahead. Read on for the full story below...

3 Biotechs with Massive Growth Potential

These three biotech stocks have massive growth opportunities on the horizon, and could add a huge boost to any portfolio. They play in some of the most in demand markets on the planet, and have track records of finding ways to introduce products into those markets to capture big profits. Novo Nordisk (NVO), Regeneron (REGN) and Corcept Therapeutics (CORT) are deserving of a very close look right now.

Coca-Cola (KO) and 2 More Beverage Stocks – Buy or Sell?

The beverage industry exhibits a bright outlook due to evolving consumer preferences amid rising health consciousness. Therefore, let us analyze whether leading beverage stocks Coca-Cola (KO), National Beverage (FIZZ), and Celsius Holdings (CELH) are Buy, Hold, or Sell now. Read more...

The ODD Story Behind Thursday’s BIG Stock Rally

We have all been worried about what high inflation will do to the economy and stock market. And yet on Thursday inflation spiked again, yet amazingly the S&P 500 (SPY) had a great session. Investment veteran Steve Reitmeister shares the reasons why in his new market outlook with trading plan and top picks. Read on below for more...

Read More Stories

More SPDR S&P 500 ETF Trust (SPY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SPY News