Zervos: The market has been extremely resilient despite rising trade tension

Market Sentiment and Trade War - The equity market has shown resilience despite significant escalation in trade war rhetoric between the US and China [2][3] - Investors appear to be fatigued by ongoing discussions about the trade war, indicating a shift in sentiment [4][5] Economic Indicators and Consumer Impact - The Fed Beige Book noted that tariffs are raising prices, particularly affecting lower and middle-income consumers [6] - Concerns arise regarding the potential impact of tariffs on earnings, revenue, and consumer spending [7] Interest Rates and Monetary Policy - Expectations for interest rates have decreased, with the 10-year yield dropping below 4%, reflecting a positive tailwind for the market [9] - There is speculation that rates could further decline to around 2.25%, similar to levels seen in 2019 [10] Corporate Sector Insights - Discussions with CEOs indicate that while the lower end of the market is struggling, the upper end remains stable across various sectors [11] - Notable investment activity includes JP Morgan's commitment of $1.5 trillion in the US, suggesting confidence in certain market segments [14] Credit Market Concerns - BlackRock and Fidelity are shorting corporate bonds, indicating concerns about tight spreads and potential distress in the corporate bond market [13] - The current tight credit spreads raise questions about the market's vulnerability to a risk-off scenario [15]