I don’t know why the stock market is suddenly having a case of the vapors. It could be the conventional explanations of the Fed slowly tightening, and/or the market is undergoing an entirely ordinary correction from rising too far too fast. The global economy is showing signs of slowing. Or it could be partially the ongoing uncertainty about Trump’s trade policy.
I confess to remaining very nervous about Trump’s tariff wars with our trading partners, notwithstanding free-trader Irwin Stelzer’s view that Trump might well win. It could well be the case that just as only the “red-baiting” Nixon could go to China, only someone as brash and stubborn and “nationalistic” as Trump could credibly take on China’s predatory trade practices. There are lots of accounts that Trump has the Chinese leadership seriously rattled.
These two charts put our yesterday by the Wall Street Journal‘s Daily Shot people are interesting, as they show trade worries seem to have their largest negative impact on China’s stock market and the least negative impact on the U.S. stock market. And vice versa. Looks like Stelzer may be right that Trump has the better poker hand. Stay tuned.