Stock market volatility was front and center last week, mainly because of President Trump’s proposed tariffs and China’s retaliatory threats.

Treasury bond volatility, on the other hand, hasn’t been as active. The long-term Treasury yield dropped to a low of 2.97% last week before rebounding to 3.07% last Thursday.

Make no mistake: Trade war talk has been the main driver of recent stock selloffs, while speculation about the reality of implementing the tariffs has helped fuel rebounds. We saw a big drop early last week and then a rebound Wednesday and Thursday.

Thursday night, Trump opened his mouth again, this time threatening $100 billion in additional Chinese tariffs. That caused Friday’s near 600-point slide for the Dow Jones Industrial Average.

You would have expected yields to drop well below 3.02%, signaling the market making a move to the safety of Treasury bonds. But they didn’t, and they barely moved on the stock rebound Monday.

The ebb and flow of stocks and bonds hinged on a potential for a trade war, not on fundamental data. Emotion, not empiricism, is driving the market.

I don’t know about you, but I prefer empiricism.

Last Friday’s March employment situation – wages in particular – was highly anticipated. The report was a disappointment compared to February, as the economy only added 103,000 non-farm jobs., February’s add of 326,000 was a huge beat, and it only stood to reason that we’d see a lull this time around.

More important, wages grew 0.3%, as expected, and the participation rate ticked higher to 62.9%, when no change was forecast.

Even though the headline number of jobs created was lower than expected, it wasn’t a terrible report.

Consumer inflation has been stubbornly low and not climbing to the Fed’s 2% target, while wholesale and producer prices are moving toward 3%.

Tuesday’s release of the March Producer Price Index (PPI) actually hit 3% on the year. Core PPI, which excludes food and energy prices, was up 0.3% month over month, exceeding expectations. The yearly rate of 2.7% is a seven-year high.

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