1. 10-Year Treasury Note Yield Highest Since 2011 – Spooks Markets
2. The New NAFTA – Global Trade Breakthrough or Just So-So?
3. More Challenging Trade Deals Ahead – China, Europe & Japan

Overview

Trump administration negotiators reached a major agreement with Canada on trade over the last weekend of September. The breakthrough, which came on the heels of an earlier deal with Mexico, vindicates President Trump’s tough approach to reforming trade and will mark a fundamental turning point for American jobs and global power.

The latest far-reaching trade agreement has a new name – goodbye NAFTA. The new deal will be known as the U.S.-Mexico-Canada Agreement (USMCA) and is much more than just a new name. Some hailed the USMCA as the greatest trade deal ever, while others complained that it’s just NAFTA 2.0. I’ll sort it out for you as we go along today.

Before we get to that, I have some analysis on what’s going on in the stock markets of late. Last week we saw the US equity markets soar to new all-time record highs, only to be followed by a severe selloff which saw the Dow Jones Industrial Average shed over 600 points at the low on Monday.

I believe this latest selloff in stocks is a reaction to the sharp rise in interest rates. The 10-year US Treasury Note yield has risen sharply since late August to a seven-year high of 3.25% on Friday and again today. A rise to this level, especially this quickly, has given stock investors a reason for concern. Here’s why.

10-Year Treasury Note Yield Highest Since 2011 – Spooks Markets

The Dow soared to a new record high above 26,950 during the trading session on Wednesday of last week, but then gave back almost all of that gain by the close. It then moved sharply lower on Thursday and Friday and has been higher and lower so far this week.

There’s plenty for the stock markets to worry about. The Fed raised short-term rates another 0.25% at its recent meeting to 2.0%-2.25% and is expected to raise the Fed Funds rate another 25 bps at the December meeting. Yet that’s not a big surprise.