Between the escalating trade war and weakening data, the economic outlook is darkening. Accordingly, the market is increasingly betting that the Fed will cut rates. The market is now pricing a 50%+ chance of a 25 bp rate cut by the end of the year. Additionally, the yield curve, which is once again inverted, is signaling future rate cuts.
FINSUM: If Trump keeps escalating the trade war with China, he will force the Fed to do exactly what he hopes—cut rates! Really though, the odds of a rate cut are rising as the trade war looks like an ever bigger headwind to growth.