Once again, US stocks rose and International stocks fell. This was driven in part by strong US earnings and in part by increased selling pressure on emerging markets stocks when trade war news intensifies. Strong results from Apple stemmed the selling pressure in tech stocks following Facebook’s disappointment last week. Interest rates remained stable.

Weekly Returns

S&P 500: 2,840 (+0.8%)
FTSE All-World ex-US (VEU): (-1.0%)
US 10 Year Treasury Yield: 2.95% (+0.00%)
Gold: $1,213 (-1.5%)
EUR/USD: $1.157 (-0.8%)

Major Events

• Tuesday – Google was reported to be planning a censored search engine for China.
• Thursday – Apple became the first $1 trillion company, following strong earnings.
• Thursday – Tesla shares rose over 10% on slower than expected cash burn and a claim by Elon Musk that the company could turn profitable in the next quarter.
• Thursday – The US suggested it may impose 25%, as opposed to 10%, tariffs on a list of $200 billion of Chinese exports.
• Friday – China released a list of $60 billion of goods it intends to hit with tariffs in response to US plans to levy duties on $200 of Chinese exports.
• Friday – Kraft-Heinz reported stronger than expected earnings, breathing some life into the beleaguered consumer products sector.
• Friday – Nonfarm payrolls increased by 157,000 last month, modestly below expectations.

Our Take

A month after the first major shots were fired in the trade war with China, the situation intensified as the US and China ratcheted up talk of more tariffs. At the same time, more US companies beat earnings expectations, and stocks marched higher.

The trade war will be a long and windy road. Investors are realizing that each new development is just one piece of the puzzle, and daily reactions are declining. That doesn’t mean it doesn’t matter, it does. But that tariffs on the scale considered so far probably won’t change the general arc of the global economy.

Given that Apple hit one trillion dollars in market cap this week, it makes for an interesting comparable and perspective. 25% tariffs on $200 billion (as President Trump is now proposing) is about $50 billion, or 5% of the value of Apple (or about what it gained this week).

Speaking of Apple, we tip our cap. CEO Tim Cook has done an admirable job of maintaining the leadership and profitability of the iPhone and expanding revenue in other areas. It is hard to get to the top, and perhaps even harder to stay at the top. There is plenty of competition. Historically, the largest stock hasn’t done very well on a forward looking basis. 15 years ago it was GE, which is now about a tenth of the value of Apple. It will be fascinating to see if Apple can maintain its magic and keep making products that delight.