Premarket:

In yesterday’s log entry I suggested that if this week’s data reflects what we’re seeing in our PWA index (a weakening [but not yet recessionary] economic backdrop), it’ll add incentive for the Administration to abandon protectionism as a strategy for combating protectionism.

Well, we’ll soon find out, as U.S. retail sales and industrial production both missed expectations this morning – following week overnight data out of China – and stocks are trading lower in the premarket as a result.

So, a double whammy this morning to get Trump’s attention. Thing is, he’s kinda tweeted himself into a corner of late; I expect we’ll get relief bounces on tweets saying he and Xi are great pals and will do a great deal, but I have to believe that, at this point, something more substantial will be needed to stem the near-term bearish tilt to equity markets.

To make Trump’s position all-the-more difficult, his old adviser Steve Bannon is egging him on this morning via a CNBC interview; where he guarantees that the President will continue with his hardball tactics against China, and propounds his populist view of the world and his utterly distorted view of U.S. history. Folks like Bannon, and, alas, today’s populist politicians subscribe to this fantasy that the U.S. has somehow been compromised by its own global leadership throughout modern history. Of course it works on the campaign stump, as victimization sells, but, in practice, populism and protectionism is economically destructive – to put it mildly!

As long as general conditions hold up in the meantime, if a further decline in stock prices inspires an end to the utterly ill-conceived strategy of battling protectionism with protectionism, it will turn out to have been hugely positive for markets.