China Stocks Double Returns Of U.S. Stocks

Chart of the Shanghai Composite (SSEC) vs the S&P 500 (SPX) - China Stocks Double Returns of U.S. Stocks

Chart of the Shanghai Composite (SSEC) vs the S&P 500 (SPX) – China Stocks Double Returns of U.S. Stocks – Source: TheTechnicals.com and TradingView

U.S. stocks had a third consecutive down day on Wednesday (March 6, 2019) since the S&P 500 (SPX) hit its year-to-date high at the major 2816 resistance level earlier in the week. Some have attributed this recent faltering of the U.S. market rally to uncertainty over the prospects of a successful U.S.-China trade deal.

Soaring China Stocks

Meanwhile, Chinese equity markets have continued to soar with little hesitation. The benchmark Shanghai Composite (SSEC) index is a broad-based China equity index that covers all stocks traded on the Shanghai Stock Exchange. And it’s up a whopping 24% year to date. This is no small feat for an entire major index, especially within the span of just over two months. In contrast, the S&P 500, which is the most common benchmark for U.S. stocks, is up “only” around 11%. This is less than half the level of performance seen in Chinese stocks year to date.

Rising U.S. Trade Deficit with China

Exacerbating this discrepancy was a U.S. Commerce Department report released on Wednesday. The report revealed that the U.S. trade deficit with China hit its highest level ever in 2018. And the overall U.S. deficit also hit a 10-year high in 2018, despite President Trump’s highly protectionist trade stance.

This report comes at a critical time, just as Trump and Chinese President Xi prepare to negotiate terms of a comprehensive trade deal. A successful outcome of such a deal would prevent additional wide-sweeping tariffs from being imposed on both sides of the Pacific.

U.S.-China Trade Agreement Likely

Reports also surfaced on Wednesday that Trump is pushing for closure on a U.S.-China trade agreement. Trump’s motivation is reportedly to boost equity markets and eventually bolster his own chances of re-election in 2020.

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Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock ...

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