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- 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.