Equities made strong gains early on Monday, but talk about imposing tariffs on imported steel and aluminum worried investors about a potential trade war, which kept the bullish momentum in check this week.
The better-than-expected reading of the non-manufacturing PMI pushed stocks higher early in the week, but the proposed imposition of protectionist economic policies from the White House and the subsequent resignation of Chief Economic Advisor Gary Cohn over the issue soon made investors nervous about a potential trade war.
Especially, once the President of the European Commission Jean-Claude Juncker specifically cited imposing tariffs on Harley-Davidson motorcycles, it was clear that he is trying to send a strong message to House Speaker Paul Ryan and the GOP establishment as these motorcycles are manufactured in his state in Wisconsin.
To conclude, equities already had a tough time dealing with accelerating inflation and potential rate hikes, but reckless policy decisions like pursuing protectionist policies could prompt further loss of confidence among investors.
Be sure to check out our previous week’s edition here, in which investors focused on comments from the Fed Chair about a potential overheating of the economy.