No model can capture it. No analyst can fully comprehend it. But it’s there and it’s not going away, at least not until the 2020 election. For good or ill, the Trump factor keeps on surprising, giving the President’s supporters reasons to cheer and opponents endless justifications to oppose his policies. The question is whether the escalating and widening battle on trade will benefit or impair the US economy in the near term and beyond? No one’s really sure at this point for the simple reason that Trump’s trade-related decisions are in flux and at times seem to evolve on a daily basis. This much is clear: the stakes continue to rise.

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Trump threatens new tariffs on Mexico over illegal immigration: Reuters
Will revised NAFTA trade deal survive new US tariffs on Mexico? CNBC
China’s mfg activity contracts by more than expected in May: CNBC
N. Korea reportedly executed envoy over failed Trump-Kim summit: BBG
US pending home sales in April post 16th straight month of annual loss: MW
Fed will consider rate cut if inflation eases and global risks increase: NY Times
US Q1 GDP growth revised down slightly to still-strong +3.1%: CNBC
10yr-3mo Treasury yield curve continues to sink deeper into negative terrain:

The revival of a risk-off bias in global markets this month has been a boon to long-term bonds. Although every corner of the US fixed-income market has been rallying this year, the latest surge in long-term maturities stands out, based on a set of exchange-traded funds.

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China halts US soybean purchases: Bloomberg
Mueller: charging Trump with crime wasn’t an option: The Hill
US suspects Russia conducting low-level nuclear tests: Reuters
Acting US Defense Sec: Trump ‘doesn’t want a war with Iran’: CNBC
Norway says Venezuelan talks showing progress: Fox
US-China trade conflict is complicating Fed’s policy plans: WSJ
Considering the bond market’s warnings about the global economy: NY Times
10yr-3mo US yield curve sinks deeper into the red: CNBC

US economic growth remains on track for substantially slower growth in the second quarter vs. Q1, based on a set of nowcasts. Although the current estimates suggest that the economy will avoid a recession in the immediate future, output for the April-through-June period appears to be at risk of decelerating to the softest pace in more than two years.

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China prepares to weaponize rare earths in US-China trade battle: Bloomberg
US Nat’l Security Adviser: Iran likely attacked tankers in Gulf: Reuters
ECB warns of asset-price declines if trade battle escalates: CNBC
Gov’t bond yields around the world fall near multi-year lows: WSJ
10yr-3mo Treasury yield-curve inversion deepens: Bloomberg
US home prices rise at the slowest annual pace in 7 years: MW
Texas mfg activity weakened in May: Houston Chronicle
US consumer expectations index rise to 6-month high in May: Bloomberg

The rear-view mirror continues to be kind to the major asset classes for year-to-date results. Every slice of the global markets is sitting on gains, based on a set of exchange-traded funds for 2019 performance through Friday’s close (May 24). But cracks are starting to appear in the foundation of this across-the-board rally.
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China’s gov’t sharply criticizes US engagement with Taiwan: CNN
Trump: Japan’s military will reinforce US forces throughout Asia: Reuters
Europe’s political center weakens after EU election: First Things
Iran: no prospect of negotations with US: Reuters
5G telecom growth in US threatened with trade battle with China: WSJ
Who will succeed ECB chief Mario Draghi? WSJ
Senate GOP vows to kill any impeachment charges against Trump: The Hill
GDPNow estimate of US Q2 GDP growth at sluggish 1.3%: Atlanta Fed
US core durable goods orders in April post smallest 1yr gain in over 2 years:

Patriotism is supporting your country all the time, and your government when it deserves it.
                                                                                                                     Mark Twain

● A Brief History of Doom: Two Hundred Years of Financial Crises
By Richard Vague
Summary via publisher (University of Pennsylvania Press)
Financial crises happen time and again in post-industrial economies—and they are extraordinarily damaging. Building on insights gleaned from many years of work in the banking industry and drawing on a vast trove of data, Richard Vague argues that such crises follow a pattern that makes them both predictable and avoidable.
A Brief History of Doom examines a series of major crises over the past 200 years in the United States, Great Britain, Germany, France, Japan, and China—including the Great Depression and the economic meltdown of 2008. Vague demonstrates that the over-accumulation of private debt does a better job than any other variable of explaining and predicting financial crises. In a series of clear and gripping chapters, he shows that in each case the rapid growth of loans produced widespread overcapacity, which then led to the spread of bad loans and bank failures. This cycle, according to Vague, is the essence of financial crises and the script they invariably follow.
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