Concerns about a trade war slash eight trillion off US market capitalisation

The good sentiment in the stock markets disappeared at the very latest in the spring, when US President Trump conjured up images of a trade war with export nations such as China and Germany in a set of tweets. Compared to the end-of-year prices, the world’s major stock indices are all slightly down. The southward slide since the all-time highs at the end of January amount at the global level to ten percent, which translates into eight trillion US dollars in market capitalisation. This corresponds to three quarters of the economic output of China or 40% of that of the United States, or, to stay in terms of the key industries involved, the cumulative market value of all the approx. 150 existing automobile and vehicle makers worldwide. This comparison clearly reveals that the latest stock market drop is an exaggeration. Yet such exaggerations can persist for quite a while. On average, since 1975 corrections to the DAX within the course of a year between the local high and the next low actually ran at 18%. If we transpose this figure onto 2018, then the DAX plummeting to as low as 11,000 points would still be a normal movement (even if we do not expect this to happen).

For investors who hope for price decreases and low entry prices, 2018 may thus be a year offering many opportunities – possibly already in the aforementioned global automobile sector, whose market value is now at half the value of the company sales booked in 2017.

 

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