More War of Words Weighs on Markets

S&P 500

Just before the bell, U.S. index marks rest at one-month lows.

The S&P 500 is down some 200 points from where it was a month ago, while the Dow Jones Industrial Average is down about 100 points and in the middle of the six-month range.

This is a far cry from where these indicators were in early May, as we looked at activity nearing all-time highs.

Some analysts expect markets to be somewhat positive this morning, even in the face of critical and still mounting pressures on international trade.

“Markets look buoyant this morning but much of the headline chatter is negative,” writes Christine Romans at CNN Business.  “As the trade war worsens, China has warned its citizens against US travel.”

Citing the massive amounts of money that have come out of top company equities in past weeks, Romans also notes the extension of a war of words between American and Chinese diplomats into the realm of history.

The 30th anniversary of the Tiananmen Square massacre finds U.S. Secretary of State Mike Pompeo releasing inflammatory statements about China’s human rights record, even as China vows not to back down in the face of U.S. protectionism.

“The events of thirty years ago still stir our conscience, and the conscience of freedom-loving people around the world,” Pompeo writes. “Over the decades that followed, the United States hoped that China’s integration into the international system would lead to a more open, tolerant society. Those hopes have been dashed. China’s one-party state tolerates no dissent and abuses human rights whenever it serves its interests. Today, Chinese citizens have been subjected to a new wave of abuses, especially in Xinjiang, where the Communist Party leadership is methodically attempting to strangle Uighur culture and stamp out the Islamic faith, including through the detention of more than one million members of Muslim minority groups. Even as the party builds a powerful surveillance state, ordinary Chinese citizens continue to seek to exercise their human rights, organize independent unions, pursue justice through the legal system, and simply express their views, for which many are punished, jailed, and even tortured.”

“It’s the first time I have heard a sitting U.S. Secretary of State admit that 30 years of American strategy to invite China into the global system has failed,” opines Romans. “Meantime, economists nervously eye economic data for signs of softening, as investors have fled to the safety of Treasury notes, pushing yields on the 10-year below 2.1% this week.”

China, meanwhile, accuses the United States of waffling on trade, ratcheting up tensions with sudden belligerence, and failing to act as a good-faith negotiating party.

“During the consultations, China has overcome many difficulties and put forward pragmatic solutions,” said China Vice Commerce Minister Wang Shouwen Sunday according to press reports at  CNBC. “However, the U.S. has backtracked, and when you give them an inch, they want a yard.”

All of this suggests a more sustained tension between the two superpowers which investors should *MOST DEFINITELY* factor into both short-term and long-term portfolio positions.