The Global Economy's Just About Due for a Rebound

China and the U.S. gave signs over the weekend that they've agreed to a truce on trade, if not a deal – which sounds encouraging and may in fact set into motion a series of events that turn out to be a bottom for this phase of the trade war.

This could happen because the global economy is tangled up in the trade war in complicated ways. The imposition of tariffs that began in earnest last year has flowed through into global trade and manufacturing data, with South Korean exports now having fallen 13.5% over the past year. That slowing growth environment combined with heightened trade rhetoric then led to falling business and CEO confidence, reflected in survey data and plunging bond yields around the world. It's also led to a hard pivot on the part of the Federal Reserve since the end of 2018, shifting from the tightening bias they had in December to a loosening bias communicated in June. Trade rhetoric, survey data, trade and manufacturing data, sovereign bond yields, and central bank positioning have all influenced one another.