Trending: Vanguard To Eliminate Trading Commissions On Majority Of ETFs To Please Investors

The U.S. has already imposed levies on $30 billion worth of Chinese imports, in addition to previous tariffs on aluminum and steel. In a move that further shocked China, the Trump administration said it is preparing to slap a 10% tariff on additional $200 billion worth of Chinese imports. If the U.S. delivers on its threats, the total value of targeted imports would surge to $450 billion, close to the $505 billion goods China is sending to the U.S. annually.

The tariffs have seemingly rattled not only the Chinese markets and the renminbi but also global markets, particularly those with high exposure to China. Semiconductor ETFs have been particularly hit, with ProShares Ultra Semiconductors (USD B) falling 11% in the past 30 days.

The new round of levies has drawn condemnation from some American officials who had supported previous tariffs. Senate Finance Committee Chairman Orrin Hatch said the move seemed “reckless,” adding he favored the start of negotiations on a bilateral trade deal that is “fair.”

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Crude Oil

Crude oil had been set for a strong week, but Wednesday’s news of a hike in supply from Saudi Arabia sent the black commodity down. United States Oil Fund (USO A) fell 2.4% on Wednesday, bringing weekly gains into negative territory. (USO A), which saw its traffic rise as much as 158% in the past five days, remains up more than 12% for the rolling month.

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Saudi Arabia increased output by 500,000 barrels per day in June, bringing output at 10.5 million barrels per day, while supply from the OPEC nations was up by 173,000 barrels. The oil cartel agreed in May to hike supplies to tame an upsurge in oil prices and keep markets well supplied. The hike was expected to start in July, but apparently, Saudi Arabia and other oil-producing countries thought it was best to proceed with the increase earlier.

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The undersupply stems from an agreement between Russia and OPEC in early 2016 to reduce output aimed at clearing an ongoing glut that had sent oil prices near record lows. However, countries such as Venezuela have seen their output drop, which, combined with the agreed cuts and strong demand, led to a shortfall.

Saudi Arabia also predicted that global demand will rise above 100 million barrels per day for the first time in history. The forecast is contingent on the lack of major trade shocks, such as an ongoing spat between the U.S. and China on trade, which may have a negative impact on confidence.

High-Yield Bonds

High-yield bonds have taken the fourth spot on the list this week with a rise in viewership of 154%, as the asset class performed unusually well despite worrying macroeconomic trends. iShares iBoxx $ High Yield Corp Bd (HYG A) has risen 0.7% in the past five days, a big move for bonds, but remains down more than 2% since the start of the year.

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High-yield bonds are closely linked to the health of the economy and the level of interest rates. Rising rates, for instance, may lead to an increase in defaults as issuers may find it hard to finance debt. Meanwhile, slowing economic growth hits companies’ cash flows, again impacting their ability to service their obligations.

Surging interest rates combined with an escalation in the trade war between the U.S. and China may lead to subdued economic activity. High-yield issuers may withstand such a shock, as their overall debt is now below peak levels in 2016.

Technology Stocks

Technology stocks have recouped most of the losses experienced during the past month and continue to plow ahead. The asset has seen its traffic rise 151% this week, not far behind high-yield bonds.

Invesco (QQQ A-), the main technology ETF mimicking the performance of Nasdaq, has surged more than 3% this week, extending year-to-date gains to as much as 13%. Some market observers raised the alarm that a large part of the gains were attributable to just five stocks: Amazon (AMZN), Netflix (NFLX), Microsoft (MSFT), Apple (AAPL) and Facebook.

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Soothing such concerns, previous bull markets acted similarly, with some studies claiming that 4% of the stocks were responsible for 70% of the gains.

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The Bottom Line

Major ETF provider Vanguard was the first brokerage to eliminate trading fees on a majority of ETFs, throwing the ball into the courts of its rivals, including BlackRock and Charles Schwab. Chinese stocks have posted abysmal performance of late as a trade war with the U.S. escalated. Crude oil reversed some gains this week after OPEC started to pump more oil in June, while high-yield bonds proved resilient in the face of uncertainty. The technology sector’s performance raised worries that the gains were driven by a handful of stocks.

By analyzing how you, our valued readers, search our property each week, we hope to uncover important trends that will help you understand how the market is behaving so you can fine-tune your investment strategy. At the end of the week, we’ll share these trends, giving you better insight into the relevant market events that will allow you to make more valuable decisions for your portfolio.

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