The Trump/Xi meeting happened over the weekend, and they did call a truce. What I can confirm from the commentary (there’s been notable differences between China’s and U.S.’s official responses, and Trump’s comments thus far conflict with both) is that there’ll be a 90-day delay in tariffs on new items, and no increase in existing tariffs, pending further negotiations.


Markets are indeed welcoming the news. However, like I said, the only thing official is essentially a 3-month cease fire.


In the meantime, I’m seeing some deterioration in economic conditions virtually across the board, and, most concerning, our financial stress subindex has declined from a high of 100 (highest possible score) earlier in the year to 9 today. The culprit being a widening of credit spreads that reflects a tightening of conditions that I believe is justified based on what has become a compromised backdrop for the global economy and the prospects for further deterioration should a number of trade disputes (the most critical being with China) not come to swift resolution. Unfortunately, while I do expect spreads to narrow initially (improving our subindex’s score) on the cease fire news, a simple 90-day hiatus doesn’t at all do the trick.


If, however, the next 90 days yields substantially improved global trade conditions, I suspect that this declining trend in the macro backdrop will reverse, and that, therefore, the current expansion has a good ways yet to run. But, at this point, time is of the essence…