This past week, the S&P 500 and the Dow Jones Industrial Average (DJIA) both reached record highs.
The S&P 500 had already been hitting higher highs in recent weeks, but this is the first time since January that the Dow Jones Industrial Average fully recovered from this year’s losses and touched a new record as well:
The Dow Jones Industrial Average tracks 30 of the most blue-chip companies in America, compared to the S&P 500 which tracks 500 companies. Most or all Dow Jones Industrial Average companies are also in the S&P 500 (and thus in the C Fund), but overall the index has less technology exposure.
After this summer when international stocks majorly underperformed U.S. stocks, we’ve seen a bit of a comeback in recent weeks.
Over the last two weeks, emerging markets gained about 5% and developed international markets (including the I Fund) gained about 4% from their lows. International stocks have still been major under-performers this year but at least so far it seems like the recent sell-off may be stabilizing.
The Turkish lira and the Argentine peso seem to have stabilized for now, and the U.S. dollar has relaxed its recent strength. The currency weakness in some of these smaller countries is what triggered part of this summer’s international sell-off.
Earlier this year, after imposing taxes on steel and aluminum imports, the United States put 25% tariffs on $50 billion worth of Chinese exports to the United States. China responded by putting tariffs on $50 billion worth of American exports to China.
In addition, China’s currency weakened from 6.3 yuan-to-USD to 6.8 yuan-to-USD, which some analysts think may be intentional from China to offset the tariff impact. A weaker yuan effectively means it’s cheaper for Americans to buy Chinese products, which offsets the impact of some tariffs.
This past week, President Trump announced another round of tariffs on China. It will be 10% tariffs on $200 billion of Chinese exports, and this tariff rate will go up to 25% by year-end if there is no further deal reached. The tariffs exclude certain Apple items and various items like bike helmets.
China responded with 5-10% tariffs on an additional $60 billion of US exports, but their premier (second in government after their president) also stated China will not intentionally devalue its currency.
The market relaxed last week because the trade war didn’t escalate as badly as some analysts predicted, and there were broad gains in U.S. stocks and international stocks, including China’s stocks.
Leah Kunze just graduated MBA and is proud of it. She is interested in automotive industry and innovations. She well be glad to receive a mail to [email protected]