There’s just one more hurdle to clear in what was, to say the least, an extraordinary week for geopolitics and markets.

Say what you will about Trump, but one thing you can’t say is that he doesn’t keep everyone on their toes. This week alone he’s started a trade war, forced Gary Cohn out of the White House thus purging one of the last globalist elements in the administration, been sued by a porn star, announced sweeping tariffs only to offer exemptions to everyone at the announcement ceremony, and arranged a meeting with Kim Jong-Un. Only David Dennison could cram that much drama, confusion, and outright hilarity into a five day stretch.

All eyes on Friday, of course, turned to February payrolls and, more to the point, to average hourly earnings. The AHE print has taken on increasing importance over the past year and starting last month, it became the market’s bogeyman par excellence, after an upside surprise that betrayed the briskest pace of annual wage growth since 2009 exacerbated the bond rout and set the stage for the harrowing bout of flash-crashing madness that sent global stocks careening into a correction the following week.

Since then, we’ve heard from new Fed chair (and guy who really wishes he hadn’t taken this job) Jerome Powell, who told Congress the incoming data has strengthened his view that inflation is moving sustainably up to target. That was a hawkish surprise and it heightened jitters that the Fed may be inclined to try and squeeze in more hikes than the market is pricing this year. We’ve heard from more Fed officials since then including Lael Brainard, whose uncharacteristically hawkish demeanor at an event in New York this week underscored the upside Fed risk. 

All of that is playing out against a deteriorating fiscal backdrop that’s seen  Donald Trump go out on a limb by piling expansionary fiscal policy atop an economy operating at full employment. Of course that fiscal gamble will be deficit-funded, which means Treasury supply is increasingly materially just as the Fed attempts to wind down the balance sheet (think: unfavorable supply/demand dynamics). Throw in the possibility that trade wars could be inflationary and you’ve got a rather interesting setup.