Stocks Fall and 30-year Treasuries Approach Record Lows as Trade Fears Increase

The stock market is taking another beating this morning and bond yields continue to fall as the drumbeat of trade war grows louder and louder. Compounding the yield drop is the notion that central banks around the world must counter-balance trade weakness in order to stop the global economy from slipping into recession. The words and actions are happening very quickly. Just this week, the White House labeled China as a currency manipulator. Although China has subsequently allowed its currency value to fall, the U.S. announcement on Monday suggests the next step could be an increase in the tariff rate. With both sides frustrated and angry, the likelihood of resuming trade talks anytime soon has dropped. As the media has pointed out, China will be celebrating the 70th anniversary of the People’s Republic in October, and President Xi is expected to show only strength and unity. A trade concession isn’t likely within that space. The Wall Street Journal believes China’s strategy is now to hold out until next year’s elections.

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