With the Dow Jones Industrial Index down over 500 points, or about 2%, an hour before the New York close, we observe an extremely close correlation between the equity market index, the “real” (inflation-protected) 10-year Treasury yield, and the price of crude oil.

S&P and 10-yr TIPS track oil

That’s a deflation trade: commodities and stocks fall along with real interest rates (the ultimate safety refuge in volatile markets).

The main US benchmarks bounced off the bottom after The Wall Street Journal reported that the Administration’s trade “doves,” Treasury Secretary Steve Mnuchin and Economic Adviser Larry Kudlow, had persuaded the president to meet with Chinese Premier Xi Jinping next month at the G20 summit in Argentina. At the worst, the Dow Jones Industrial Average had fallen by 699 points. A half an hour before the close, it was down 270 points.

The trade war with China was only one factor afflicting markets, though.