With the recent development of blacklisting the Chinese tech giant Huawei, the scope of the trade war has expanded much larger than originally thought. The semi-conductor sector has been hit really hard as China is the largest buyer of the U.S. made semi-conductor products. This action against Huawei sure does look like an existential risk for Huawei.
Since the beginning of the breakdown of the trade war negotiation, the S&P 500 index only suffered a decline of 5.17% from high to low. Despite the severity of the consequences of a prolonged trade war, the investors refused to believe the reality. The S&P 500 made a temporary bottom around 2801 level on Monday May 13th,
The market has been so bullish since the December bottom that even with the worst kind of announcement about the trade war, it refused to believe that the reality is finally here. The major indices suffered only minor damages. Last Friday the market had an intraday bullish reversal indicating it should go higher on Monday.
It has been 86 trading days since the December 2018 low. The S&P 500 index rallied a total of 25.89% from low to high. The high occurred on Wednesday May 1st after the Fed meeting conference. After the initial 1.8% drop on Thursday, it rallied back on Friday based on good employment numbers.
