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Illustration: Sarah Grillo/Axios
Despite warnings from economists that the U.S-China trade war could cause a global economic recession, investors have been buying rather than selling.
What's happening: Both institutional investors and hedge funds have gone bargain-hunting in the weeks since President Trump reignited the trade war by increasing tariffs on Chinese imports to 25%. Investors remain largely convinced that the public squabble between the 2 countries is bluster, and that a deal is likely sooner rather than later.
Details: Bank of America-Merrill Lynch equity analysts said Tuesday its clients "bought the dip" for the second straight week, with $2.2 billion worth of cash flows to stocks, "which may suggest optimism that a deal will be reached and global growth will continue to recover," Jill Carey Hall, an equity and quantitative strategist at BAML, wrote in a note to clients yesterday.
The intrigue: Even at the height of selling, when the market sank 5%, investors were not panicking. Data from Deutsche Bank found that net long positions in equity futures — which were at the top of their historic range before the selloff — have only fallen modestly and remain above average levels.
But data shows that investor confidence may be misplaced, as tariffs are already starting to make an impact. Goldman Sachs analysts note that U.S.-China trade is showing significant slowing in items hit by initial tariffs on steel and aluminum imposed by Trump in early 2018.
Even so, fund managers remain bullish and hedge funds have significantly cut back on defensive positioning, Masanari Takada, a quantitative strategist at Nomura, said in a note to clients.
Stock buyers have a number of reasons to be bullish beyond an inured belief that Trump is a studio gangster.
The April reading of U.S. existing home sales missed expectations on Tuesday, adding another losing month to a long trend on a year-over-year basis.
The big picture: After sales fell by almost 5% month-over-month in March, which was the biggest drop since November 2015, there was hope April would show a major pickup. That didn't happen, but LendingTree chief economist Tendayi Kapfidze tells Axios it's still too early to panic.
Mortgage rates fell for the 4th straight week, with the 30-year fixed rate mortgage hitting its lowest level since January 2018, the Mortgage Brokers Association reported this morning. That should help boost next month's reading, Kapfidze added.
Aside from oil and lean hogs, 2019 has been a tough year for commodities. Coffee prices have fallen 9%, natural gas is 11% lower and soybean prices have fallen 7% to name just a few. The diamond industry is also in a slump, Bloomberg reports.
What's happening: "Diamond miners are struggling across the board, especially those producing cheaper and smaller gems where there is too much supply," writes Bloomberg's Thomas Biesheuvel.
Companies made progress in hiring women as CEOs in 2018, but those companies were mainly located in emerging markets. Developed world countries, especially North America and Japan, showed little to no pickup in hiring women at top positions, data from PwC shows.
The utilities industry had the largest share of women CEOs at 9.5% followed by Communication Services and Financial Services at 7.5% and 7.4% respectively.
Banks are healthier and taking on less risk, but that doesn't necessarily mean that the financial system is safe. The risk has largely just moved outside the banking system to the so-called shadow banking industry, ratings agency Fitch said Tuesday.
What it means: Shadow banks are financial institutions outside the traditional banking sphere that aren't governed by U.S. banking regulations.
Why it matters: The risks could include "direct and indirect exposures faced by banks, insurance companies and pension funds, reduced financing availability for banks and non-financial corporate borrowers, and increased asset price volatility," Fitch analysts note.