This Morning’s Log Entry

Trump was clearly rattled by yesterday’s market action; during a speech last evening he suggested that we’ll know if we have a [China trade] deal in 3 to 4 weeks: he said “we’ll see, but I think we’ll get a very good deal”. On that, U.S. equity futures went from red to modestly green; trading notably higher in the cash session this morning. 

Having added measurably to tariffs last week, with China announcing new tariffs on U.S. imports beginning 6/1, and with the U.S. trade rep unveiling a proposal for tariffs on the remainder of all Chinese imports, I don’t suspect that a tweet here and there will provide the lasting market boost Trump will be hoping for.

I’ll be surprised, given the market’s reaction to the latest on trade, if Trump makes good on his threat to announce tariffs on EU autos this week. If he does, the market will tank further. If he doesn’t, and if he goes so far as to suggest that he has no intention to, we’ll likely see a meaningful rally. Although I suspect we’ll need to experience more pain in equities before we hear any such lasting (sounding) declarations. Thus, unless we get a further (and increasingly dramatic) meltdown in equities this week (certainly a possibility), inspiring a conciliatory statement, I expect the Administration will issue a tariff threat toward the EU, but take no action at this juncture.

There’s plenty of data to parse this week. The PWA index is reflecting a weakening macro picture; should that begin to show up in the latest data, it too should inspire a constructive approach to the trade mess we find ourselves in.


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