(New York)

Yesterday was an ugly reminder of the fourth quarter. The Nasdaq fell 3.4%, its worst decline since December 4th. The S&P 500 wasn’t much better. The big falls came on the announcement that Trump was considering raising tariffs on a further $300 bn of Chinese imports following the failure of negotiations last week. Investors are anxious that the trade war may continue to escalate and impact the global economy. One economist summarized the situation this way, saying “The confrontation has now escalated to a battle of testosterone between two leaders who believe they have much to prove to their constituents. But the longer this exhibition of chest-beating lasts, the greater the odds of a US, if not global, recession”.

FINSUM: Though recently we have been more placid, a couple of months ago we were worried that a deal might be hard to complete because of how much China has on the line politically. The country’s unelected leaders need to keep their people happy, which means the stakes are incredibly high for them.