Yesterday, we got a strong rebound in the US stock markets. The first 50% of the rally might have started due to CNBC announcing that US Trade Representative Greer would appear on TV. But let’s also say that it might have been just a technical dip-buying move as prices fell into the Friday’s lows at the cash open.
Now, Greer didn’t really say anything new but he did deliver two key comments:
- We always watch the stock and bond markets.
- We want to make sure the market responds to appropriate info.
That second comment is key. It sounds like they don’t want the market to think this is going to be another April. They want the market to keep expecting a de-escalation.
Just a day earlier, we got US Treasury Secretary Bessent sounding a bit more aggressive even though he didn’t say anything new as well. Nonetheless, the markets didn’t like his comments. That was then followed by the news of the Chinese taking some countermeasures overnight that triggered another wave of risk-off.
It’s curious that after the selloff, USTR Greer appeared on TV with more soothing words. As if it was on purpose. This is something that the Fed also does in unique circumstances when the market misinterprets their message.
Even Trump’s late post on Truth Social threatening a termination of cooking oil business with China sounds like a very weak move. The most important subject is rare earths.
To me, this suggests a limited pain threshold by the US administration which shouldn’t be surprising given the overstretched positioning in the stock markets. The Friday’s selloff was so aggressive for this reason. So, if things go south between now and November 1, then we could indeed have another April-like selloff
