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Volatility UP...qtr 3 ER's have extra tariff expsorue

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What a roller coaster its been for equity indices globally the past two weeks. Bad data continued to trickle out from the US this month. September's ISM was the worst print in a decade (2008) signaling a possible recession in US manufacturing. However ADP employment and consumer sentiment prints are still holding strong. These are significant as consumerism is the only thing keeping this economy chugging along. We got some relief on the latter end of the week as Trump hinted of a partial trade deal which sent markets in a frenzy. Buying on Friday morning was aggressive with a substantial gap up due to a strong European session (DAX in particular) and open drive to monthly highs in anticipation of a "mini deal" announcement later that afternoon. However the deal was not what wall street was hoping for. It did not clear the newly proposed tariffs simply delaying the next round till December. It gives Trump some time to make more progress with Xi in Chile next month but these tariffs are incredibly important as they would effect the rest of Chinese goods in the US markets. They would affect consumers more than any of the existing tariffs which is why the sell off was so intense into Fridays close. Next week starts quarter 3 earnings report season. This quarter is of particular interest because they are going to be the first ER's that will be effected by the ramp up in the trade war that started in May. EPS guidance has been continuously lowered throughout the year so any misses will hold extra merit. SPX put's are at an all time premium for the year and with the fundamentals showing more uncertainty it looks like their big price tag is warranted. VIX ETP's exploded with buy side volume end of day Friday and have been trading in an elevated range between the 15/20 mark the past several sessions. Be careful buying here before the big names have reported earnings. Stay safe and hedge accordingly!

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Forgot to mention we have another Fed FOMC meeting this month. CME's fed watch tool is pricing in another cut but the consensus from most asset managers is more nuanced. It seems the most likely scenario is another 25bps cut and a hold on any further cuts until next year. Obviously the announcement of "progress" on the trade front will throw some cold water on bullish bets for Fed Policy. The announcement of QE in all but name (they insist its not QE but they aren't fooling anybody) also raised eyebrows this week. Some are worried a slowdown in easing is necessary to save some policy ammunition in case we see growth slowdown more than expected in 2020. Do not dismiss the chance for no more cuts until next year. Even if we do get another 25bps any change to the dot plot in favor of less cuts will not be taken kindly by equity traders.