US-China trade war tension
On Monday, June 18, Trump announced that the US will impose an additional tariff of 10% on $200 billion of Chinese goods. Previously, on March 22, he had announced the imposition of import tariffs on up to $60.0 billion of Chinese goods.
After two rounds of trade negotiations in May 2018, the US and China weren’t able to reduce trade concerns. Although the trade worries eased in mid-May, both the countries now seem to be engaging in a trade war after President Trump’s announcement of additional import tariffs on June 18. China’s commerce ministry also provided an immediate response to this announcement and said that it will take immediate countermeasures if the US (SPY) (QQQ) continues with this tariff structure.
FANG stocks’ reaction
Despite the rising trade war concerns, Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL), which are collectively known as the “FANG” stocks, are hitting record highs. FANG stocks’ new highs in such an environment are due in part to the fact that China doesn’t play an important role in their revenue. Since the start of June 2018, FANG stocks have rallied sharply.
Facebook and Netflix rose 2.2% and 2.9%, respectively, on Wednesday, June 20. Although the broader market S&P 500 Index (SPY) witnessed some nervousness in the last three trading days, the FANG stocks hit new highs despite US-China trade war worries. The FANG stocks have led the nine-year bull market.
In the next part of this series, we’ll analyze the recent performance of Facebook and Netflix.