With one tweet, US President Donald Trump reversed all of Wall Street's gains ... and then some.
"....I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in billions in Tariffs. MAKE AMERICA RICH AGAIN."
The implication, of course, is that all the good things he said about his weekend talk with Chinese president Xi over the weekend, is not on.
This was top of the list on Bloomberg's "Nine Reasons for the Sell-Off in U.S. Stocks" piece published today. The list also includes geopolitical concerns, Brexit, technical breaches, sell-off in momentum names, softening US housing markets, forced selling, JPMorgan chief executive Jamie Dimon's comments that he saw a flat fourth-quarter trading environment.
"The first inversion of any portion of the Treasury yield curve in more than a decade awoke the specter of a recession," he said.
Sure, they all add up. But if (and whenever) Wall Street does a rebound, opposing rationales will be in the fore once more, explaining the whys and wherefores for the bounce.
However, the main game remains Trump and the Fed. The more Trump tries to "Make America Great Again", the more the Fed becomes determined to reduce/remove policy accommodation.
Trump's tax cuts and infrastructure spend has given extra oomph to the US economy. Ones, that the Fed is trying to hose down by virtue of its mandate for stable inflation - that's being "oomph" by Trump's increased tariffs on US imports.
The Fed may term its policy normalisation efforts as "gradual" but given the reaction in the financial markets (near inversion of the 10-year two-year US bond yield spread - the one that precedes recession) appears to fit more with the definition of aggressive.
How aggressive? US inflation expectations - derived from the differential between US nominal bond yields and Treasury Inflation-Protected Securities (TIPS) shows how aggressive.
And this, when the fed funds rate is just at 2.25% going on 2.5%.