Powell Trump Tango

Happy Friday,

What a way to start the worst 2 seasonal months of the year: Fed, Trump, Jobs. Plenty to muse over this weekend!

Will admit to feeling a bit buffeted here. Some thoughts: 

Neither Draghi (surprise) nor Powell (no surprise) communicated well which coupled with poor EU data and a decent Q2 US GDP print has led to a surge in US equity relative outperformance.

The expensive stuff just keeps getting more expensive: US equity, US Big Tech, US$, DM Sov duration….

Is Trump’s Powell Put matched by Xi’s Huawei Put? (Side note Huawei surprised to upside this week) If Trump’s concern is China trying to wait him out his back to back blow ups are unlikely to bring them to a deal which seems to remain beans for bits.

China’s leadership is on a 2 week Econ Policy hideaway - how will they respond - will the Sept meeting take place (maybe we should hope for no meets bc after every one there is a blowup)?

Don't see Trump moving again on China tariffs; the Full Monty (25% on full $500B) would likely cause major US equity selloff and recession. Trump could be done; bluster yes, further action, unlikely.

Jobs # came in as expected; however did anyone note Manuf hours worked fell to their lowest level since 2011? Farmers & blue collar workers (Trump base) both under pressure?

Market reaction to both Powell mid cycle insurance comments & Trump’s latest tariff threat (oil’s worst day in 4 yrs) show how deep rooted growth fears are. Yet, GS notes Asian trade cycle bottom seems overdue while several Firms have called the bottom in the semi cycle… darkest before the dawn?

Given the bearish market action and opinion flow let's end with some positives: Global Easing Cycle well under way with more (ECB, PBOC?, EM CBs) to come; Q2 EPS coming in better than expected in both the US and Europe; perhaps more importantly, JPM notes above average # of companies revising 2019 guidance higher; growth plays (miners etc) are already deeply oversold; liquidity is flowing and Financial Conditions are easing while GS indicators suggest risk appetite was low going into this week.

Have a great weekend - you deserve it!

Jay and Jamie