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Trump talks up the Trade War and berates the Federal Reserve
There was no shortage of news and market volatility again in August as the U.S./China trade war, the G7 meeting in France, the central bank summit at Jackson Hole and the continued berating of Federal Reserve Chief Jerome Powell by President Donald Trump all had investors scrambling for some signs of economic direction around which to position their portfolios. On top of that, the barrage of ‘tweets’ on a variety of topics from the U.S. President also upended views on a daily basis as the tone shifted between saying that ‘trade talks were going well’ to positing whether China Chairman Xi or Jerome Powell was ‘the bigger enemy of the U.S.’ To say that these are unprecedented times seems a massive understatement. On top of all the headline news, investors also had to deal with economic data that continues to deteriorate, with Germany and Britain both on the verge of outright recession, China growing at its slowest rate in over three decades and the ‘infallible’ U.S. jobs machine starting to see some cracks. Those with more ‘bearish’ market views appeared to win out for now in August as stocks suffered their worst month since the May, despite a late-month rally on some major portfolio ‘rebalancing’ and more optimism that ‘cooler heads would prevail’ in the trade disputes. Meanwhile, gold prices surged to multi-year highs despite a strong U.S. dollar and bond prices also surged to new highs, with the ‘yield curve’ giving the strongest recession call since 2007 as 10-year yields dropped below 2-year yields. (more…)