Get ready for more chatter about a potential global trade war, thanks to the Trump administration confirming that it may double down on its proposed tariffs on China.
“What was at first a trade skirmish,” writes economist Joseph Stiglitz, “appears to be quickly morphing into a full-scale trade war.”
There already has been “a major uptick in tariff conversation” in second-quarter earnings conference calls, note Bespoke Investment Group’s analysts.
But they’re also highlighting bullish action by key U.S. market measures of risk, as they serve up our call of the day.
The VIX VIX, +9.20% — often called the market’s “fear gauge” — hasn’t climbed much so far, Bespoke’s team points out, saying “that hardly signals a white-knuckle feeling on the part of investors.”
What’s more, junk bonds are still looking good, even as high-flying stocks like Facebook tumble.
“Not only has high yield been relatively unscathed, but the sector has made a new high on a total-return basis over the last few days,” the analysts say, as they share the chart below showing a Merrill Lynch index’s jump above its Jan. 26 peak.
“That’s something we haven’t been able to say since 1/26, which was also the last time the S&P 500 closed at a new high.”
Don’t miss: Trade-war tracker — here are the new levies, imposed and threatened
And see: Trump’s trade moves upend the global economic order, says Bank of America
Getting back to their bearish point on trade-related talk, the Bespoke crew says the word “tariff” has already come up 609 different times in the S&P 500’s second-quarter earnings conference calls, up from 290 occurrences in the first quarter. Roughly half of all companies have reported Q2 results so far, the analysts add.
Meanwhile, China is reportedly urging the White House to “return to reason.”
Check out: Think tariffs are barely hurting earnings? Think again
Also read: Here’s what companies are saying about tariffs this earnings season
See any pattern? pic.twitter.com/Qd7MvP0ERh
— Bespoke (@bespokeinvest) August 1, 2018
