Tariff Mania Overreaction

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Posted: Mar 13, 2018 11:33 AM
Tariff Mania Overreaction

For conservative economists and mavens, the Ides of March came early when the White House floated the idea of tariffs on steel and aluminum.  The Dow Jones Industrial Average started the month down more than 400 points.  There were warnings of doom and gloom, as the world would surely retaliate with their own tariffs.

Never mind that America saw its global trade deficit swell to $566 billion last year.   We are led to believe that China has an alternative to the $505 billion in stuff we bought last year, or that the EU is really going to overplay its hand and further threaten its $171 billion trade advantage.

For me, however, the best gauge of Tariff Mania overreaction came from the stock market.  The Dow has since erased the knee-jerk losses.  But more importantly, one of the top export products has been the hottest niche of the market.

The semiconductor index, which only recently eclipsed its prior high-print established 18 years ago, is soaring.  In January, America exported $4.2 billion in semiconductor products, second only to industrial machinery.  Today, the Philadelphia semiconductor index hit an all-time high.

Click here to view the chart.

Overall, there is an anticlimactic feel after that monster session on Friday, as investors look for catalysts beyond the tech sector.

News that Larry Kudlow may be in the running to take Gary Cohn’s place lifted the market a bit. However, the Dow is still down about 100 points, the S&P500 relatively flat, and the Nasdaq is higher, up 30 points.  Advancer led decliners 1471/1376 on the NYSE and 1528/1253 on the Nasdaq.