Markets rise but US stocks face trade and other headwinds

Markets rose on Wednesday.

The S&P 500 rose 0.1 percent, the STOXX Europe 600 rose 0.3 percent and the Nikkei 225 jumped 1.1 percent.

Despite escalating trade tensions between the US and China, Matt Forester, chief investment officer of BNY Mellon’s Lockwood Advisors, said that “without any visible effect on economic data, investors are just looking through the noise”.

In contrast, strategists at JP Morgan see the trade war as a headwind for US stocks. “As half of the trade with China now may be subject to tariffs, there is an increasing probability of corporate earnings being revised lower, dampening the sentiment toward U.S. stocks,” said the strategists led by Marko Kolanovic.

Jack Ablin, chief investment officer at Cresset Wealth Advisors, said that the trade war adds to inflationary pressure that is already building. “The bond market is beginning to get a little concerned about it. Stocks are not there yet,” he said.

And all this comes at a time when the US stock market is already expensive. According to Jim Paulsen, chief investment strategist at The Leuthold Group, the median US stock price-earnings ratio is almost 50 percent more than at the top of the internet stock bubble in 2000.