By Ivan Martchev via Iris.xyz.

ZeroHedge, in its typical eloquent fashion, noted last week that stocks are from Mars, but bonds are from Venus, in describing the downdraft of U.S. Treasury bond yields and the significant rebound in the stock market. The two do not rhyme very well, which should be expected when the economic ramifications of a protracted trade war with China are difficult to quantify – as we have no idea how long it will last.

Commodities are From Venus Too

To that, I can only add that commodities are Venetian, too, as they clearly agree with the message of the Treasury market. The London Metals Exchange Index has now taken out the lows from December 2018 when oil was near $42. There is a heavy correlation between industrial metals’ prices and crude oil. Sometimes they lead, sometimes they lag, but they typically correlate heavily with crude oil, as they are both highly economically sensitive.

The rebound in the stock market is clearly related to both Fed Chairman Powell’s indication that the next move from the Fed is likely to be an interest rate cut, as well as the averted crisis in the immigration standoff with Mexico, as the stock market understood the 5% tariff would not be imposed. Even though the official news came after the close on Friday, there were plenty of leaks suggesting a benign outcome.

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