How Things Look When the U.S. Dollar Suddenly Emerges as a Risk Asset

High level of uncertainty triggers a sustained increase in risk premia across all asset classes

Highlights

• High level of uncertainty triggers a sustained increase in risk premia across all asset classes

• China’s retaliation pushes U.S. equity futures back in the red

• Oil prices move fractionally below break-even levels for the major producers

• Bond markets expect the inflation impact of tariffs to be short-lived

Key Takeaways

• China Hits Back, Hard: Dow futures were up earlier this morning but we know that means very little in these turbulent times and, in fact, have swung to the red as Beijing just took its tariff rate against imports from the U.S. to 125% from 84%. Tack on the back-door retaliation by sanctioning the weakest yuan in 18 years. We warned that China would be tough to push around — all anyone needs to know is its history and incredible capacity for pain. As the refrain goes, America packs a powerful punch, but China has a steel-plated chin.