The stock market appears poised to jump again. The reason for upticks in the stock market centers on decisions made in China. Apparently, China wants to reduce the impact of the trade war on its domestic economy. The trade war, among other factors, drives fears of an impending recession in the United States and China. When news suggests the trade war may not be as impacting, economic outlooks become more positive. As a result, the stock market commonly experiences a rally.
The trade war is not reaching an end. China, however, has suggested it wishes to work with the United States to reduce tensions. China likely fears an exodus of manufacturing from its borders which, in turn, could lead to high unemployment.
China’s commitment to reducing the trader wars impact comes in different forms. Recently, China changed rules to reduce the amount of money banks must keep in reserve. By freeing the money, an economic stimulus takes place. Whether the result is long or short-term is unknown.
According to euronews.com, if China succeeds in softening the trade war’s effect, Chinese companies won’t be the only ones affected. U.S. and Japanese companies, among others, rise with the proverbial tide. After all, various international company fortunes tie themselves to the Chinese market.
Previously, things did not look upbeat for the stock market. Declines in the Dow Jones average blared sirens about a recession. At one point, the market dropped 800 points. At present, the Down Jones’ average is hovering just under 27,000, a massive high.
Good news comes from international markets as well. In Europe and Asia, the markets moved in an upward direction. Recession fears weren’t exclusive to the United States. Worries about a global recession crossed numerous analysts’ minds. Many believe Germany is already in a recession.
Stocks aren’t the only assets seemingly on the rise. Oil futures along with gold head towards increases, pleasing investors and traders.
Are improvements in the stock market sustainable? No one can answer that question with any certainty. The volatile stock market experienced sharp ups and downs in recent months. Once speculation turns towards gloom, the market picks up. As soon as analysts talk up the positives of the market, things swing in another direction. The process continually repeats itself. Such is the nature of the economic effects of a trade war.
Dil Bole Oberoi
