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Market-Implied Odds Of Trade Resolution Collapsed From 80% To 7% Last Month. Here’s Where They Are Now
During Donald Trump's manic (and that's a generous characterization) call-in interview with Fox's Maria Bartiromo on Wednesday, the president detailed what he described as "Plan B" for compelling China to bend the knee.
"My Plan B with China is to take in billions and billions of dollars a month and we’ll do less and less business with them", Trump told Bartiromo. It wasn't immediately clear how that's any different from "Plan A", which, after a year, has dead-ended in recriminatory balderdas
Trump keeps on insisting that the tariffs are putting Billions of dollars into the US Treasury from China. Surely this is something that should show up on the balance sheet at some point. Something we can all point to and say “Wow it’s working”. Anything yet???
“…[A]lthough the whole thing feels a bit self-referential.” Yeah, construct a “trade tension model” of the price movements (i.e. outcomes) of about 711 cases (US equities) that purports to show the relationship of market movements to recent press announcements and policy changes in US-China trade. Then build a single “index” (trade barometer) from that model that is called “Market implied probability of US-Sino trade resolution”. Then call it a true “representation of reality”. Amazing what you can do with statistics like canonical correlaitons and logistic regression. And amazing how many people will believe it and “act accordingly”. Totally bogus. Might as well borrow the watches of 711 street people and tell them what time it is.
I’m not sure a mutually agreeable solution even exists at this point (with Trump, not the US, as one of the bargaining parties). The Rubicon may be behind us.