As we move closer to the end of 2018, questions about the US – China trade tensions, possible Federal Reserve hikes in 2019 and general uncertainty have triggered 500 point swings in the Dow Jones Industrial Average. The Dow closed lower on Tuesday but not after a shocking price swing that shows gains and losses on the same day – clearly investors are exhausted.
Despite trading higher by 368 points the market reversed and dropped as the 30-stock Dow fell by 53.02. It has become clear that when talk of a US China break through on trade has taken place, investors and short-term traders buy stocks aggressively. However, when the reality of “no deal” comes from a White House leak or from the press, the market sells-off aggressively. Keep in mind that that markets are rallying 1 percent on a regular basis but are eventually shocked.
Chinese Vice Premier Liu reportedly said Tuesday that he was in contact with US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer with a message that he wanted to de-escalate the trade war. Some of this optimism was clearly enough to drive markets higher, especially when President Trump tweeted that “very productive conversations going on with China” but again markets were, in the end, disappointed.
Another negative news story was the fighting between Trump and Democrats in the White House. Despite all indices falling, Tech stocks did rally as some investors are looking at selected names that have been oversold or beaten down. These are now more attractive investments for long-term investors.