Image Source: PexelsThe flu has been running wild in my house. Everyone has gotten it, and I have had it since the middle of the week. So, I haven’t wanted to do much and haven’t been paying attention to the market. But it is still early enough in the day, and I feel well enough to get something out to you.The ‘Tariff Man’ is back. I guess, at this point, those on social media who thought that tariffs were negotiating tactics and that Trump was just bluffing weren’t around during Trump 1.0. This version of Trump 2.0 seems even more emboldened. With that, tariffs were placed on Canada, Mexico, and China, which are now over. Worse, those countries are all preparing or have already announced countermeasures.The IG US 100 CFD has been trading lower by about 1.3%, indicating where Nasdaq futures might open tonight.Bitcoin doesn’t seem to like the news either, and it has been trading lower by nearly 3% this weekend. But until Bitcoin breaks below the 91,000 level, everything that happens is just noise. That support level has held multiple times. Certainly, 2-year inflation swaps can move higher from here if the market fears the inflationary impacts of trade wars on the economy. The swap has been consolidating at the upper end of the trading range for some time, and a breakout would not be favorable for the Fed’s fight against inflation. Speaking of the Fed, the market still thinks there is a good chance the Fed is finished with cutting rates. The 3-month Treasury 1-year and 2-year forwards have been trading in line with the 3-month Treasury spot rate. Trade wars will complicate the market when realized volatility and implied volatility are low. This means that if we start to see days when the S&P 500 moves by roughly 75 bps or more, realized and implied volatility will begin rising. This, of course, comes at a point in the cycle where implied correlations are very low. The 1-month implied correlation is at 8, despite the sell-off we saw in stocks on Friday. Readers of this commentary likely know that when the 1-month implied correlation index bottoms and starts to rise, the S&P 500 tends to put in a short-term peak. Implied correlations were due to rise anyway because the volatility dispersion season is now ending. Implied volatility for the ‘Fab 5’ started falling last week, with just Amazon and Alphabet left to report; the rest will come down this week. But more importantly, if volatility returns to the S&P 500 and IV starts to rise, and stock IV rises as well, correlations will increase. We will see where things stand after Monday.More By This Author:Stocks Drop As The Fed Fails To Promise More Rates CutsThe Bear Steepener Could Be Ready To Resume The Market’s Risk/Reward Does Not Favor The Bulls