Trade and Tariffs Monitor – 9.30.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.


  • We think there is common knowledge in US risky asset markets that the China Trade War is the most important risk/event to other investors. We think interest rate / central bank narratives are derivatives.
  • We furthermore believe that the “Tweetstorm-sensitive” mechanism whereby shorter-horizon investors are updating estimates of these outcomes has itself become common knowledge.
    • Everyone knows that everyone knows that Trump’s trade tweets move markets.
  • Other than perfunctory, peripheral coverage of Chinese missile parades, we still do not see (1) national security issues or (2) a transition to a pure domestic political game in this narrative structure.
  • That means we still think this is an unpredictable Game of Chicken that warrants very little use of investors’ respective risk budgets.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Emerging Markets in Grip of China’s Yuan More Than Ever [Bloomberg]

Its leash lengthened, China’s yuan flirts with trade war role [Reuters]

How the U.S.-China trade war makes clear the folly of arms races [Washington Post]

US-China trade war not hurting diaper maker Kimberly-Clark, CEO says [CNBC]

Chip stocks brush off trade war and rally to near record highs as investors bet on 5G [CNBC]

Trade and Tariffs Monitor – 8.31.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.


  • As we mentioned in our last research note, while not complacent, markets entered August with what we think was a more-confident-than-warranted view of the general direction of the US/China Trade War, which remains a Game of Chicken.
  • President Trump’s stridence on tariffs led to a few things, in our view:
    • The evaporation of any hint of complacency about trade and tariffs resolution. If there was a short-term asymmetric bet on downside vs. upside outcomes, we think that opportunity has passed – and perhaps flipped into “alarmism.”
    • The sharp increase in negativity of coverage, to its lowest points since we began tracking it. Coverage has been deeply pessimistic and concerned.
    • An increase in cohesion from trough levels, as varying probabilistic “prediction” markets on the trade war gave way more universally to coverage asserting or implying that (1) Trump might not be a friend to markets, even for political reasons, and that (2) rates needed to be cut by more than expected to prevent the negative impact.
  • We think there is common knowledge in US risky asset markets that the China Trade War is the most important risk/event to other investors. We think interest rate / central bank narratives are derivatives.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Wall Street analysts worry these stocks are caught in the deepening US-China trade war [CNBC]

COLUMN-Trump must choose between economy and trade war: Kemp [Reuters]

Consumers are America’s not so secret weapon to keep economy afloat, but they can’t save the world [CNBC]

Feds Powell, under pressure, likely to stick to mid-cycle message [Reuters]

Fears of China Capital Flight Hang Over a Newly Sliding Yuan [Reuters]

Trade and Tariffs Monitor – 7.31.2019

Editor’s Note (8.21.2019):

We received a couple comments from readers that they found the different presentations for the charts and for the raw signal data for Sentiment and Attention confusing. Thanks! And we agree. It’s confusing.

We’ve accordingly updated July monitors below so that (1) sentiment charts show the same rolling 3-month values we provide in the data spreadsheet rather than our spot calculations and (2) the attention charts show fixed historical values as per the data file, rather than a dynamically updated series to reflect the changing long-term average. No changes to the raw XLS data.

If you would still like to see the faster/dynamic presentations of the signal data, let us know. Otherwise, our plan will be to keep it as simple as possible.


Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.


  • Three things happened to Trade and Tariffs narratives in July, leading up to a rather eventful start to August:
    • Attention remained at record high levels under our measure. The supreme importance of the Trade War remains THE market narrative.
    • Our spot measure of sentiment rose, as expectations of a thawing / cooperative resolution generally strengthened.
    • Cohesion continued its fall, as (1) new voices, including Chinese perspectives, entered the fray with different narratives and (2) topics veered toward Brexit and US/EU trade issues.
  • The result was that, while by no means complacent, markets entered August with what we think was a more-confident-than-warranted view of the general direction of the US/China Trade War, which remains a Game of Chicken. As we said in June, take risk on their unpredictable outcomes at your own peril.
  • We recommend reviewing Ben’s brief note sent on Monday, August 5th for our views updated following the early month volatility.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Chinese stocks are a buy even without a trade deal, says top emerging market fund manager [CNBC]

Beto O’Rourke begins filling in the blanks on the economy, taxes and entitlements [CNBC]

US-China trade war has had limited impact on semiconductors, says industry expert [CNBC]

Foreign purchases of American homes plunge 36% as Chinese buyers flee the market [CNBC]

Trade war fallout on China is not as bad as the numbers imply, Stephen Roach suggests [CNBC]

Trade and Tariffs Monitor – 6.30.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • Trade and Tariffs continues to be the dominant narrative; it sits at our maximum attention level for the second straight month.
  • As with last month’s update, we believe that these narratives are deeply connected to language and narratives about central bank policy and the rationale for expected rate cuts.
  • The cohesion of these narratives, however, has fallen fairly sharply. We don’t think this means that it isn’t dominating the market’s attention – we think it means that more missionaries are joining the fray to promote their own narrative.
    • We are observing a more strident embrace of global narrative promotion by the Chinese.
    • We are observing some confusion in US media on how to integrate President Trump’s demands for a rate cut with celebration of the strength of the economy and market (the transformation of US/China into a Political Game is still present, if muted).
  • For now, we are not seeing the same existential saber-rattling. It is a short period, so we would not overreact. Still, some aspects of a now-global narrative war begin to look more like a Game of Chicken again. Take risk on their unpredictable outcomes at your own peril.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map


Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

U.S. stock futures, Mexico peso gain on U.S.-Mexico deal [Reuters]

Kudlow Says Huawei Reversal by Trump Isn’t ‘General Amnesty’ [Bloomberg]

World shares rally again on Trump tariff relief, Fed hopes [Reuters]

No Wonder Donald Trump Loves Brexit So Much [Bloomberg]

China says will respond if U.S. escalates trade tension [Reuters]

Trade and Tariffs Monitor – 5.31.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • Consistent with our suspicions from our prior monitor report, attention to Trade and Tariffs narratives soared to their highest level since we began tracking the topic – nearly every article written about financial markets had some attachment to trade war discussions, whether as explanations for May returns or as an explanation of macro drivers.
  • The growth in attention, however, exceeded our expectations when President Trump doubled down on his threats with Mexico tariff rhetoric and when administration officials in both the US and China accelerated geopolitical and national security rhetoric.
  • This is no longer a complacent narrative structure.
  • It is also no longer a Game of Chicken. It is a geopolitical game in which the political outcomes may permit a lose/lose choice by both parties on trade.
  • Trade and Tariffs and Central Bank Omnipotence narratives are intertwined. This leads us to believe that the “Fed put” narrative structure is specifically complacent about a rate cut response to trade war concerns.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Wall Street Braces for More Volatility as Investors Seek Hedges [Bloomberg]

Fed Seen as More Likely to Cut Rates After Trump Boosts Tariffs [Bloomberg]

Shorts Beware, Your Archenemy in the Stock Market Is Revving Up [Bloomberg]

Wall Street Refreshes Trade War Script as Sell-Off Gathers Speed [Bloomberg]

$1.2 trillion in stock market value lost so far from trade war sell-off with more expected [CNBC]

Trade and Tariffs Monitor – 4.30.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • For much of April, cohesion continued to drift downward, as trade and tariffs discussions splintered further into distinct Europe, North America, China and now US/Japan trade clusters.
  • Meanwhile, sentiment remained noticeably more positive than in the recent past, leading us to believe that the narrative structure was still highly complacent.
  • In early May, a couple well-placed tweets from President Trump very briefly showed some measure of the volatility-inducing potential of negative surprises on this complacent narrative structure.
  • We suspect that focus will return to China/US trade discussions in May, and we would not be surprised to see sentiment retreat somewhat.
  • Will the complacency about a positive outcome stick around? We think it will be heavily influenced by whether the additional tariff threat is a true negative surprise or a manufactured “wall of worry.” We lean toward the latter, but that is opinion and not something we necessarily see in the narrative data.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map


Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

US and China are reportedly drawing closer to a final trade agreement [CNBC]

Mnuchin hopes for ‘substantial progress’ in China trade talks [CNBC]

Killer hog disease now a ‘dire situation’ in China that could lead to higher global prices [CNBC]

Analysis: As trade talks reach endgame, U.S.-China ties could hinge on enforcement [Reuters]

Deripaska Affiliate to Invest in Kentucky Aluminum Mill After U.S. Sanctions Lifted [Bloomberg]

Trade and Tariffs Monitor – 3.31.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • While cohesion of Trade and Tariffs narrative remains high from a quantitative perspective, our evaluation of the language itself leads us to believe that it is decidedly complacent.
  • The existential language being used for months has faded, and the center of global trade and tariffs discussions in March wasn’t even the China-US trade discussions – it was Europe!
  • The narrative IS about cars and soybeans and farmers and blue collar workers again, and less about national security.
  • What does that mean?
    • It means that if you have a divergent (i.e. more negative) odds view on outcomes, you may have asymmetric payoff opportunities.
    • We still don’t think anyone ought to have strong confidence in such an view on the odds on outcomes.
    • But it does strike us as asymmetric for those capable of taking advantage of complacency about a positive US/China trade resolution.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Narrative Cohesion

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Big-Solar Owners Warn Patent Dispute Could Roil U.S. Sector

Factbox: EU preparations for no-deal Brexit

China’s Factories Are Struggling to Hire Enough Workers

Next 5 to 10 years could be ‘really tough’ for our competitors, VW chief says

‘Pervasive uncertainty’ pushes top central banks to patient stance

Trade and Tariffs Monitor – 2.28.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • Cohesion around Trade and Tariffs narratives has gone into some decline in early 2019, in our view because (1) markets are more clearly discounting a positive outcome and (2) because central bank omnipotence has taken over as the primary governing narrative in the U.S.
  • The effect is a narrative map with more distance between discussions of equity and credit markets and discussions of trade – we note that the trade discussions continue to be high stakes and loaded with national security language.
  • The narrative still has decent cohesion, but coupled with the spike in sentiment, we would feel comfortable calling this an increasingly complacent narrative structure from a markets perspective.
  • What does that mean?
    • It means that if you have a divergent (i.e. more negative) odds view on outcomes, you may have asymmetric payoff opportunities.
    • We still don’t think anyone is likely to have justifiable confidence in such an view on the odds on outcomes.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Narrative Cohesion

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Trump’s China Trade ‘Win’ Will Cost the U.S.

Senate panel wants Chinese-funded institutes to change or leave U.S.

Optimism Has Its Limits as Trade Worries Resurface

Trump Wants to Meet With Xi ‘Very Soon’ Over Trade War

U.S. Corn, Poultry `On Table’ During China Talks, Perdue Says

Trade and Tariffs Monitor – 1.31.2019

Access this month’s monitor slides in Powerpoint and in PDF.

Access the data in Excel.

  • Attention on Trade and Tariffs is now as high as we have measured it. This is the most central issue to the narrative of US financial markets – even more so than rates.
  • Some of this further increase appears to be related to conflation of discussions of China-US trade concerns and general concerns about a slowdown in Chinese economic growth.
  • Our main areas of concern, however, have grown – the strongest trade and tariff narratives are not about agricultural and automobile tariffs, but national security and intellectual property. The more fundamental trade issues have moved further from the center of the core narrative.
  • Overall sentiment has ticked up slightly on the back of occasional leaks of optimism, but the sentiment around these core national security and IP issues is negative and focused on lack of progress.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

All the Days Are Big Days for Stocks as Bulls, Bears Trade Blows

A reason for hope: Back-to-back down years for the stock market are rare

Emerging Bonds on Cusp of Rally Now at Mercy of Fed, Trade Talks

Italian Manufacturing Shrinks Again as Nation Nears Recession

Breakingviews – Tech to disrupt supply chains more than trade wars

One of the U.K.’s Biggest Craft Brewers Is Dreading Brexit

Trade and Tariffs Monitor – 12.31.2018

Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • The focus on a China Trade War narratives accelerated even further in December.
  • As in our November update, we remain concerned with the conflation of the trade narratives with national security issues. Words like “Nuclear” and “Troops” are very connected and near to the core in December, just as “Taiwan Straits” and “South China Sea” were core in November.
  • We think this has the potential to maintain the heightened focus of markets on this topic.
  • As outlined in the In Summary note from January 6, however, we think that the emerging connectivity between trade/tariffs and central banking communication policy will be worth monitoring. We remain cautious about active risk-taking on trade/tariff themes, but with the current narrative structure would revisit this view based on communication from central bank missionaries linking those themes with interest rate policy.

Narrative Map

Source: Epsilon Theory, Quid

Narrative Attention

Source: Epsilon Theory, Quid

Fiat News Index

Source: Epsilon Theory, Quid

Narrative Sentiment

Source: Epsilon Theory, Quid

Key Articles

As fear rises on Wall Street, strategists warn the worst is yet to come

With conflicting signals, market is a hybrid of a bull and a bear

Factbox: Contrasting Chinese, U.S. statements on trade war agreement

US STOCKS-Wall St advances as trade optimism gathers steam

China renews U.S. soy purchases as trade tensions ease

December Early Indicators Show China Slowed for a Seventh Month

Decades of Growth at Risk as China Car Sales Keep Dropping

Trade and Tariffs Monitor – 11.30.2018

Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • Thanks to a remarkably concentrated November point-in-time measure, our attention measure rose sharply. 
  • There is now an emerging narrative around tariffs and trade: they are a national security issue. This has the potential to be a powerful switch in rhetoric, leveraging a meme with strong emotional content to attach tariffs to territorial conflicts, intellectual property disputes and cybersecurity concerns. 
  • We would be very mindful of the ability for this pivot to sustain trade policy that might otherwise be unsustainable and unpopular.
  • While Brexit has obvious trade implications, it has been surprisingly undercovered as a trade issue. Outside of its impact on bank sustainability, it is currently almost completely divorced from any trade narratives and is not something we would expect to exert significant influence on ex-UK financial markets unless there is a material and surprising event.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

U.S. Crop Giants are Doing More Brazil Deals Thanks to Trade War

U.S., China ‘not on the cusp’ of trade deal: White House adviser

Pence’s Sharp China Attacks Fuel Fears of New Cold War

November Brexit Deal Hopes Fade as U.K. Ministers Fail to Agree

Fed points to December rate hike but is worried about tariffs and debt

Trade and Tariffs Monitor – 10.31.2018

  • While it is only a single data point, our October attention measure rose from its very low base over the prior three months. Our aggregate rolling measure of that attention remains low.
  • Similarly, sentiment and language in articles about Trade and Tariffs have continued to be very negative in comparison to more benign and technocratic coverage of the issue in late 2017 and early 2018.
  • The sub-themes that are being most attached to markets, positioning and stocks are also the ones that have emerged with the strongest connectivity to all other themes: National Security. We think this is important. By attaching trade and tariff issues with China to territorial disputes, IP and cybersecurity, narratives here could take on a lot more influence in the minds of allocators and investors.
  • While our measures of fiat language and advocacy journalism rose in the February/March concern about tariffs, we have not yet observed that in the most recent uptick. 

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Sentiment Index

Source: Quid, Epsilon Theory

Key Articles

Asia shares bounce after rout, but sentiment fragile

Harley-Davidson posts largest profit beat in two years, Europe sales rise

Stand together, Britain’s May calls for unity on Brexit

Wall St. cuts losses as investors snap up shares

Powell: U.S. outlook “remarkably positive” with low unemployment, tame inflation

Trade retaliations against the U.S. hit Canada farmers, too

America’s global trade war finally arrives at the WTO as members dispute US tariffs