Trade Talks Have Two Key Implications for Markets
Whatever happens, keep an eye on the dollar and measures of volatility.
It’s getting bearish on Wall Street.
Photographer: Joe Raedle/Getty Images North AmericaThis week has marked the resumption of global trade uncertainties, with U.S. President Donald Trump threatening to increase tariffs on $200 billion of Chinese products from the current 10 percent to 25 percent starting Friday. At the same time, China is preparing retaliatory tariffs on U.S. imports should Trump carry out his threat, Bloomberg News reports.
There are two major implications for investors. First, the CBOE Volatility Index, or VIX, is likely to rise after several months of relative calm in the so-called fear gauge as larger-than-normal fluctuations in equities become more common. Second, the perception of higher global risk will prompt more capital flows to the U.S., the ultimate haven, boosting the dollar. It’s possible the Bloomberg Dollar Spot Index exceeds levels reached in the aftermath of Trump’s election victory in November 2016. That implies a more than 6 percent gain in the greenback.