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The U.S. stock market has left $ 5 trillion on the table as trade on the past 17 months, Deutsche Bank estimated on Friday.
"While other factors also play a role, the trade has been key in the global growth and keeping U.S. equities range bound. "They are worth $ 5 trillion," wrote Binky Chadha, the bank's chief strategist, in a Friday note, based on an appreciation rate at an annual rate of 12.5% (see chart below).
Deutsche Bank
Chadha's calculation is based on the capitalization of the Russell 3000
RUA, -1.28%
$ 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, -1.32%
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, posting 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, also fell more than 6% for the month.
Read: Stock market suffers 'key' monthly reversal that 'presages deeper declines,' technician says
The May retreat was 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 and the economic growth outlook. Those worries were amplified after President Donald Trump late Thursday announced he would place escalating tariffs on the United States.
See: President Trump's top trade official
Chadha said the toll is comparable to the impact of the European financial crisis in 2011-12, which was also around the time of the US debt downgrade, as well as to the dollar-and-oil shocks that accompanied the collapse of crude oil prices. 2014-2016.
"In terms of duration, the current episode is still 5-6 months short of those two episodes. But it is noticeable that the current situation has increased significantly, "Chadha said.
The foregone is already equal to 12 years of the U.S. bilateral trade deficit with China, he noted.
"While we subscribe to the consensus view that US trade deficits and macro-economic policies are unlikely to have any impact, they are unlikely to be affected by bilateral trade deficits. and that trade policy would fix them, it was already worth 12 years of that bilateral merchandise deficit, "Chadha wrote.
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