We’ve maintained that the saving grace for the market when it comes to the threat of a global trade war is the market itself.


This morning’s news with regard to oil makes our case. Here’s the headline:

Oil Falls 3%, Below $69, As Treasury Says Importers May Get Leeway to Buy Iranian Crude, Despite Sanctions

Upon oil spiking into the 70s recently in response to the U.S. State Department pushing Europe to cut its Iran oil purchases to zero, President Trump called on the Saudis to ramp up production to offset the hit to the U.S. consumer. They essentially said “we will, but only as conditions call for.” In other words, “sure we’ll up production as the price rises, but that’s because it’s smart business to do so.” 


This morning’s news speaks to the power of the market over the politician: Not seeing the relief the Administration hoped for after the President’s call to OPEC, Washington is suddenly backing away from what was originally presented to be a steadfast, no exceptions, resolution.

As for stocks and the trade war: Three Monday’s ago the Dow was trading off by roughly 480 points in the early afternoon (pt) in response to Treasury Secretary Mnuchin’s morning announcement that any company owned 25% or more by a Chinese entity would be barred from investment in the U.S.. Merely a few hours later, just as the Dow was careening toward a 500 point loss on the day, the uber-protectionist (of all people) White House trade adviser Peter Navarro contradicted Mnuchin’s statement by stating that there’ll be no restrictions on any company from anywhere, based solely on the domicile of its owners. The Dow promptly recovered nearly 50% of its intraday decline.


Clearly, the markets hold great sway over the political powers that be.