Fears of a trade war have given a boost to some of the smallest companies on the market as well as some of the biggest technology companies, but they've squeezed almost everything in the middle.
For more than three months, investors have focused on U.S. negotiations with trading partners including China, Europe, Canada and Mexico. In general, stocks have dropped when investors feared that increasing trade sanctions would disrupt the global economy and cut into corporate profits, and then rallied when Wall Street felt that negotiations would resolve the disputes with little to no economic harm.
That's contributed to a volatile stock market this year, after the unusual calm of 2017. Big swings have come day to day, and even hour to hour, as investors try to get a sense of what will happen with trade. When the market hasn't been whipsawed by the trade drama, it's found comfort in strong corporate earnings and U.S. economic growth. As a result, the benchmark S&P 500 index is down less than 1 percent since late February.
Some companies have been hit hard. Machinery makers like Caterpillar and Deere have taken losses as investors expect they will have to pay more for aluminum and steel parts, and that tariffs on their finished products will hurt sales overseas. Companies that make pork, consumer goods and liquor have also come under pressure because they might be targeted by retaliatory tariffs.
Meanwhile the smallest stocks have done very well. Many investors have concluded that small, U.S.-focused companies are less vulnerable to tariffs than the multinationals in the Dow and the S&P 500, and that the U.S. might have stronger economic growth than other countries in the months to come. Smaller companies tend to do far more business at home than multinationals do.
Other stocks are also coming out ahead. Technology companies have made huge gains recently, helped by strong earnings and analysts' view that businesses will continue to spend more money on technology in the years to come. While technology companies make a lot of their sales outside the U.S., investors feel tariffs are less of a threat for tech companies than they are for machinery makers.
Trade issues will be front and center as leaders from the Group of Seven countries meet in Quebec Friday and Saturday, but investors aren't expecting any big breakthroughs. Experts think the disputes and market swings could continue for a long time.