(Bloomberg Opinion) — The global stock market drifted lower on Monday, posting its biggest decline in more than three weeks. Yes, there’s still plenty of time for equities to recover and gain for a sixth consecutive week, which would match their longest winning streak since they advanced for 10 consecutive weeks over the course of late 2017 and early 2018. But doing so may hinge on a critical event Tuesday. 

Even with the modest decline, the MSCI All-Country World Index is still up 19% this year. The surge in recent weeks is due largely to optimism that the U.S. and China are close to reaching an agreement on “phase one” of a broad trade deal. It doesn’t matter that the details are likely to be modest; what matters is that it would signal that the trade war isn’t worsening. That’s why President Donald Trump’s address to the Economic Club of New York on Tuesday is so critical. No one is quite sure which Trump will show up. Will it be the one who in recent weeks has trumpeted progress in trade talks, or will it be the one who has said that the U.S. hasn’t agreed to a rollback of tariffs on China, which is what the markets truly want? This is no small matter for investors. Various surveys have shown that trade uncertainty is the primary risk facing markets. In that sense, whatever Trump says on Tuesday has the potential to either ratify the rally or bolster the case that it’s built on little more than hope. And as everyone in markets learns on their first day in the business, hope isn’t a strategy. “Markets have been skittish waiting for any concrete information about the trade talks,” Matt Forester, the chief investment officer at BNY Mellon’s Lockwood Advisors, told Bloomberg News. At 15 times forecast earnings for the following year, the MSCI is trading at its most expensive level since the start of 2018.

Trump’s talk is not the only big event for markets this week. Federal Reserve Chairman Jerome Powell will address the Joint Economic Committee of Congress on Wednesday, the same day as the start of public impeachment hearings against Trump. The U.S. Labor Department will also provide an update on inflation for October. The week ends with data on U.S. retail sales for October, which economists hope will be a reversal from September’s big miss to the downside. But as already stated, hope has no place in markets.

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THE BOND GAME ISN’T OVER YETThe bad news for the bond market is that November isn’t even halfway over and it’s already the worst month for fixed-income investors since April 2018, with the Bloomberg Barclays (LON:) Global Aggregate Index down 1.40% as of Friday. The good news is that there’s plenty of time for the bond market to rebound. And just as with the stock market, Trump’s appearance at Economic Club of New York —  along with Powell’s testimony — may determine whether the recent sell-off in fixed-income assets is overdone. That’s the short-run prognosis. In a nod to John Maynard Keynes, bonds are dead in the long run anyway. Well, at least according to Moody’s Investors Service they are. The credit ratings company put out a research report Monday saying the rising tide of populism spreading round the world has caused it to turn “negative” on global sovereign credit for 2020. Unpredictable domestic and geopolitical risks along with a push for populist policies that weaken institutions, help slow growth and boost the risk of economic and financial shocks means governments will struggle to address credit challenges, Moody’s wrote. That’s scary, but the major ratings companies aren’t known for their astute political science observations. Yields on 10-year Treasury notes are lower now than when S&P Global Ratings stripped the U.S. of its AAA rating in August 2011.

GO BIG OR GO HOMEThe thing about bond sell-offs in recent years is that have tended to be short-lived, thanks largely to central banks. The collective balance sheet assets of the Fed, European Central Bank, Bank of Japan and Bank of England rose to 35.7% of their countries’ total gross domestic product in October from about 10% before the financial crisis, according to data compiled by Bloomberg. And judging by some of the latest moves made by the ECB, bond traders can be a little less worried about a lack of buyers. The ECB started its second round of corporate bond purchases by acquiring in a week an amount that analysts expected it to buy in a month, according to Bloomberg News’s Tasos Vossos. The central bank bought almost 2.8 billion euros ($3 billion) of company debt securities in the week to Nov. 8, according to data released Monday. It was the second-largest weekly purchase figure since the ECB first adopted the strategy, known as quantitative easing, in June 2016. The bank suspended the program last December and restarted it at the beginning of this month as growth flagged across the euro area. It’s unknown whether the faster pace of purchases is in response to the big drop in bond prices and corresponding jump in yields, but it should be comforting to know that the ECB is doing its part to stem the weakness.

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CHILE GIVES INIt’s becoming routine to see the Chilean peso leading the list of biggest losers in the foreign-exchange market on any given day, and Monday was no exception. The peso weakened 1.72% to a record low, bringing its depreciation since Oct. 18 to 6.39%. To put that into context, the next biggest loser among the 31 major currencies tracked by Bloomberg, the Argentine peso, has dropped just 2.48%. It’s well known by now that the populist movement that Moody’s warned about on Monday has erupted in Chile, where a wave of protests has disrupted the economy and government. The latest move lower in the peso came as the administration of President Sebastian Pinera said it would overhaul the constitution drawn up during the dictatorship of Augusto Pinochet to calm three weeks of mass protests. So why did the peso and Chile’s equity market, which fell 1.52%, take it so harshly? Many people regard the constitution, drawn up under the dictatorship of Pinochet, as the foundation of an economic system that privatized pensions and much of health care and education, a chief grievance of protesters, according to Bloomberg News’s Javiera Baeza and Eduardo Thomson. It also enshrined the strict legal safeguards to private property that are behind Chile’s water privatization, a controversial subject in a country struggling with severe droughts.

NATURAL GAS STUMBLESThe natural gas market cares little about trade wars or populism. To traders there, it’s all about the weather. slid the most since January as forecasts showed that a cold snap descending on the U.S. would peter out by the end of the month, curbing demand at the time of year when consumption of the heating gas usually surges, according to Bloomberg News’s Christine Buurma and Naureen S. Malik. Gas was the worst-performing major commodity Monday, tumbling as much as 6.1%. Temperatures will probably be mostly normal in the eastern half of the country Nov. 21 through Nov. 25 as an autumn chill fades, according to Commodity Weather Group LLC. Beyond the weather, the slide in natural gas underscores how record production from shale basins continues to weigh on the market even as exports soar and the power industry becomes more reliant on the fuel. Without a sustained Arctic chill this winter, stockpiles will remain above normal for the time of year, pressuring prices lower, according to Buurma and Malik. As they point out, hedge funds are adding to the bearish momentum, holding the largest short position since 2015 for the time of year.

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TEA LEAVESWhen the National Federation of Independent Business said a month ago that its small-business sentiment index for September fell to near the lowest level of  Trump’s presidency, it noted that the part of the gauge measuring “uncertainty” plunged to its lowest since February 2016. “More owners are unable to make a statement confidently, good or bad, about the future of economic conditions,” the group said, with 30% of respondents reporting “negative effects” from tariffs. Don’t expect much improvement when the group provides an update on Tuesday. The median estimate of economists surveyed by Bloomberg is for a reading of 102 for October, little changed from 101.8 in September. Bloomberg Economics points out that small-business activity has been moderating since the last report. Most notably, the ADP (NASDAQ:) private employment survey indicated recently that net hiring has shrunk to half the pace that prevailed last year, to the slowest since 2011.

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