I Know First’s Successful Prediction of Global Stock Market Decline

I Know First Research Team LogoThis article was written by the I Know First Research Team.


  • Decline in Global Stock Indexes from 10 May 2019
  • Trade War between China and US affecting S&P500, DJI and NASDAQ
  • Companies Affected by Trade War include AAPL, NKE and BMWYY

Global Stock Market Decline

On 3 May 2019, I Know First algorithm successfully predicted a decline in stock market prices. Those included S&P500, FTSE, Shanghai Stock Exchange (SSE). Interestingly, volatility indexes such as VXO, VIX and VXD rose during that period.

Unsurprisingly, the prediction from 3 May to 17 May 2019 was accurate. As per I Know First’s bearish forecast, the markets indeed saw a decline between that period. This decline in global stock indexes could be largely attributed to the trade war between US and China.

On 10 May 2019, the Trump Administration increased the tariffs on $200 billion from 10% to 25%. This was after a breakdown in negotiations between the two countries. Three days later, China retaliated and threatened to raise tariffs on $60 billion worth of goods following 1 June 2019.

Source: BBC

Trump’s trade policies aims to reduce the $419 billion trade deficit that the US has with China. Last year US imposed three rounds of tariffs on $250 billion worth of Chinese goods. Beijing imposed tariffs on $110 billion worth of US goods. They also accused the US of starting the largest trade war in economic history.

The two largest economies in the world are creating a spread of frenzy throughout the world. In 2018, US and China were responsible for the flow of $700 billion of goods sent between the two countries. They are each other’s biggest trading partners, but now things have started to change rapidly with the escalating trade wars.

How the Trade War between the US and China is Affecting the World Markets

Source: OECD, The Economist Group, Schroders Economics Group
Source: OECD, The Economist Group, Schroders Economics Group

On Friday, 10 May 2019, China announced their retaliation to the US tariffs. US stock market fell sharply. The following Monday morning, The Dow (DJI) lost more than 600 points, S&P500 dropped by 2.4% and the Nasdaq lost 3.3%. Volatility indexes such as VIX, showed a showed an increase during an uncertain period in the market.

However, US and China are not the only economies affected due to supply chain. Countries affected by US tariffs on chinese goods include many countries in Asia such as Taiwan, Malaysia and Singapore. In addition, countries affected by Chinese tariffs on US goods include Canada, Mexico and Colombia. I Know First’s forecast accurately predicted many stock markets. For example, FTSE fell 1.17%.

Following the announcements about the tariffs, Asian stocks also saw a decline. Japan’s Nikkei Index (N225) dropped by 4.9% and the Shanghai Composite Index (SSEC) fell by 1.4%.

In Europe, Germany’s industrial output has close ties to Chinese demand. The country’s carmakers have plants in the US and business in China.

Stock Market Affected by Trade War

Under the Top 10 stocks under S&P500 package, Micron Technology (MU), Cognex Corporation (CGNX) and Encana Corporation (ECA) were some of the companies listed to short.

For instance, Micron Technology stock prices decline 0.39% following China’s retaliation announcements on Monday. MU is a US semiconductor company. Semiconductor firms rely heavily on sales of microchips to tech companies in China. Hence, tariffs placed on the US goods in China will have a negative impact.

In addition, Cognex Corporations plunged 2.2% following the announcements. As a manufacturer of machine vision and industrial barcode readers, CGNX also faced a decline in stock prices. Moreover, China accounted for over 15% of the revenue in 2019.

Furthermore, German stocks felt the impact of the trade wars even more as they have plants in the US and export heavily to China. BMW (BMWYY) fell by around 5.3%, Daimler (DMLRY) dropped by 7.3% and ThyssenKrupp (TKAMY) plunged by 8.3%.

With a rapidly growing middle class demographic, China is immensely important as buyer of American goods. In 2018, US exported $120.3 billion of goods to China, making it the third largest market of US exports.

Generally speaking, China’s middle class consumers contribute to the sales of more cars, iPhones and sneakers. Tariffs will hurt the demand of General Motors, Apple and Nike goods. Harley-Davidson lamented that the tariffs would cost the company up to $120 million this year. Additionally, Boeing heavily impacted as a large number of China’s population are flying more.

What Tariffs Mean for Companies in the Long Run

Sadly, companies caught in the middle of this trade war did not receive much warning and time to make the changes. They fear losing market share if they pass on added costs to consumers. Hence, many US companies bear the brunt of the added tariff costs.

Interestingly, there is a trend of companies starting to shift its supply chains out of China and are redesigning its products to avoid Chinese components.


In summary, the trade war escalated in ways that the world did not prepare for. Global economies inextricably link to US and China. Moreover, many companies had little notice to prepare themselves for the global stock market decline. With the World’s Economic Growth under threat, countries might be forced to relax their monetary policies to keep their economies afloat.

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Please note-for trading decisions use the most recent forecast.