The “Trade War” is getting real, and the higher prices imposed by governments in China and the US. Tariffs are just import taxes, paid eventually by the customer, so they raise prices… which, our economist friends will tell us, suppresses demand… and since the higher price is going to a tax, not to a company, there isn’t a commensurate profit increase to go along with the falling demand, and it’s bad for pretty much everyone.

So we’re seeing more “real” stories about that these days, which is almost certainly going to impact the sentiment of business leaders who are deciding how big to make their orders, and when to place them, and whether to try to push into new lines of business right now (Japan’s motor maker Nidec, for example, cut its profit outlook by 25% because of an “unprecedented demand fall” for their parts, which go into stuff like appliances and electronics and cars — that’s just an anecdote, but absent a big sentiment shift it’s possible that piles of anecdotes eventually become data and a trend as everyone reads what their competitors are doing… the first wave has been the tightly watched consumer products and semiconductor stocks, most visibly Apple and TSMC and HonHai/FoxConn in recent weeks, all of which are indicating that demand is falling off quickly).

That will continue to suppress economic activity, probably only a little bit at first, but as we combine it with political uncertainty everywhere (including Brexit and the US government shutdown, among others, more signs of our embarrassing failure to choose rational adults as our leaders), things could certainly get worse and create a great unforced global recession. Probably one was coming our way at some point anyway thanks to the convergence of increasing government debt and rising interest rates, we were due to hit a point eventually where debt service costs rose enough to create another austerity slowdown… but it looks to me like there’s a good chance that sentiment is driving us to slow down the economy before it gets slowed down for us.

So what does that mean, portfolio-wise? Not much, and the market’s interpretation of this narrative could always move by 180 degrees overnight… as was the inkling we got today with the news that China may e offering a “zero trade surplus” in their negotiations, and as pundits continue to say that something ...