The global financial markets are reacting to two forces at work: what Federal Reserve chair Jerome Powell might do to the US economy with interest rates, and what President Donald Trump might do to the Chinese economy with tariffs. Interest rates set by the Fed may or may not prove helpful for the US economy, given its unknown future path. It is not the president but market forces that are restraining interest rate increases in the US. Their absence is helpful to share prices, all else — expectations of earnings growth, for example — remaining unchanged. It is the US bond market itself that has eliminated any rational basis for the Fed to raise short-term interest rates. Should it pursue any aggressive intent with its own lending and borrowing rates, interest rates in the US marketplace, beyond the very shortest rates, are very likely to fall rather than rise. Hence the cost of funding US corporations that typically borrow at fixed rates for three or more years and the cost of fundi...

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