A taste of what was to come came from a 'perceived' accommodation by the Fed when it cut rates the last go-round; reflecting meekly on factoring-in not just global stresses, but sluggishness blamed on the 'trade war'. Hence, realizing it or not, President Trump took that as empowering him to influence the Fed, by virtue of simply increasing tariff levels in the trade war, barring a progress to resolution of course. Now there's another reflection on all of it.  

Don't fight the Fed is an old adage that I've often mentioned; attributing it to a long ago Finance Professor Marty Zweig (later as a money manager I was invited at a dinner in New York to join his group but did not). Marty often mentioned that saying on Wall Street Week; and now I'm recalling it perhaps as an advice to President Trump: don't fight the Fed; they actually can win.  

I'm slightly mystified by Bill Dudley's (I always respected) extraordinary and overtly political 'op-ed', in which he blatantly calls on the Fed to defy Trump calls for lower rates to offset any toll taken by the 'trade war'; with emphasis on the Fed's independence. I have felt the Fed should restrain stimulus but for different reasons. What I read in the former NY Fed's head's writing is a glimmer of insight into power the Fed knows it has (even if others don't).    

Trump IS fighting the Fed. Dudley suggests the Fed resist and fight back. In one section of the Federal Reserve Act, there's a reference to how the Fed's able to arbitrarily (with a vote of 5 members) lower rates selectively, if given 'exigent circumstances'. What's unclear is how Bill Dudley manages faith in the Fed's ability to fine-tune, when there are plenty of examples of mistakes in policy and the repercussions. In fact Dudley was at the helm during most of the extreme globalism expansion, largely managed by the NY desk.  

It is not mentioned; nor what might happen, 'if' the Fed does accommodate, and later tightens (mentioned that the other day); and likewise imagine if the Fed 'fights' Trump by flat-out refusing to stimulate when the U.S. is slow but not at all like much of the world (here in Marseilles today I visibly sensed the heavy atmosphere of change in France; and it wasn't just humidity).  

However, despite Trump's pretty-clear big mission which (slightly humorous) may be to slay dragons, crush Persians, and tackle the Fed; really aims for a resurgent American predominance, and perhaps is cognizant that the flips and tweets have challenged credulity; and pretty much wore thin, to a point nobody knows how to address it; including the Chinese.  

That's the China of course thrust toward modernity (a wise move that offset Russia at the time) with hopes that with real capitalistic success (in a slightly tyrannical communist state) they'd allow gradualism to encourage freedoms and demand for rights (this is clear when you notice how many financial and media headquarters for Asia are in Hong Kong, but not in Mainland China proper). It hasn't exactly worked out that way; and China is close to capable of going it without US components (they mentioned that today); while really this story is very important; it's not at all nearly over; and the future prospect of peace, stability and even prosperity in this Century, may depend on how it gets sorted-out. I don't just mean the 'trade war' either; but impact on Asia.      

In sum: as this market consolidates (expected after yesterday's chaos), it's just interesting to reflect on how the Fed could actually make or break this or any President. Hence perhaps best not to pin everyone on, or fight the Fed.

The world 'probably' seems scarier than it is; and both China and Trump are realizing some of the moves or rhetoric have been excessive. Stay tuned.

IF Trump postpones hiking tariffs at the intended September implementation date; the market will go up. If the Fed fails to cut rates further; the market is likely to go down. And neither or even both could happen in these days and weeks just ahead. It's tit-for-tat versus obviously uncertainty that prevails.  

And of course very cautious 'possible' recession warnings; something I have argued evolved a bit over the past year or longer in a procedural if gradual fashion (towards a time of coinciding with ending rather than start of issues). The world's biggest bubble is debt; but that too isn't likely to pop just as yet.   

However that's not to say that complete fiascos by the Fed, Trump or China can't derail that; and throw us into more chaos; which rather than leading to a 'hot' war between the leading economic powers; perhaps compels a deal. There is of course the thought that Trump doesn't want a deal and all of this is part of the strategy; even with the Fed complicit. That I actually doubt.