The U.S. stock market has left $5 trillion on the table as trade tensions over the past 17 months contributed to an effectively sideways trade, Deutsche Bank estimated on Friday.
“While other factors also arguably played a role, the trade war has been key in preventing a recovery in global growth and keeping U.S. equities range bound. Foregone U.S. equity returns from price appreciation for 17 months are worth $5 trillion,” wrote Binky Chadha, the bank’s chief strategist, in a Friday note, based on an price appreciation at an annual rate 12.5% (see chart below).
Chadha’s calculation is based on the capitalization of the Russell 3000 RUA, -1.28% a broad measure of equity markets, which had a capitalization of $28.7 trillion at the start of 2018. Foregone returns for the index over 17 months comes out to $5 trillion.
The S&P 500 SPX, -1.31% in the first four months of 2019 bounced back sharply from a steep fourth-quarter selloff nudging to an all-time closing high in April. But the index has retreated more than 6% in May, leaving it on track for its first monthly decline since December and its worst May performance since 2010. The Dow Jones Industrial Average DJIA, -1.41% which failed to return to record territory before the May swoon, is also off more than 6% for the month.
The May retreat has been blamed by analysts in large part on an escalation in the U.S.-China trade fight that shows little likelihood of near-term resolution. The battle between the world’s two largest economies has contributed to jitters over the global and U.S. economic growth outlook. Those worries were amplified after President Donald Trump late Thursday announced he would