Steady and nervous at the same time? Welcome to 2020 financial markets.

Jobs… The most-watched economic report every month is the release of employment data for the prior month, the release always during the first week of the new month. Most-watched because fresh data, and most sensitive for the Fed. The Fed has de-emphasized its long-term worry about unemployment falling too low and triggering inflation, but the relationship does exist and is also tied to wages.

In today’s report for December, job creation was in a sweet spot, the 145,000 new jobs close enough to growth in the work force plus the underemployed finding better work that the labor market did not tighten. The gain in hourly wages was poor, only point-one percent, hence nothing to shift the Fed toward undoing last year’s cuts. To the contrary: if wages and inflation underperform for a series of months, then a cut will be in prospect. Wage data is unusually uncertain, last year’s gains at the low end of jobs perhaps pushed by increases in local minimum wages neither persistent nor spreading.

IT strength, but ISM sweet spot… Late in each month the Institute for Supply Management (ISM) surveys its members, basically asking, “How is business?” Its members are purchasing managers, the old name for the association the much more descriptive National Association of Purchasing Management. Like the monthly employment data, the ISM surveys are important because brand new data, but also because such good reflections of the current economy, and because of the age and reliability of the surveys.

The ISM now conducts two surveys, manufacturing and service sector. The manufacturing one dates to 1923, in current recognizable form since the 1970s. The service sector one began only in 1998, hence a shorter period of correlation with the economy, but also with a problem in definitions — and both surveys now struggle with changes in the economy.

We all understand manufacturing, but the overall U.S. economy is less and less sensitive to manufacturing, now perhaps only 15% of GDP. Most people still associate “services” with low-wage work: “burger-flipping” in the most crude dismissal. But today the service sector includes almost all IT work and production, and almost all work today is intertwined with IT.

Last week the ISM found manufacturing in contraction, a survey value below 50. The service-sector survey is always released a few days later — would it tank also? Nope, up to 55 from 53.9 in November, just fine.

So, rates are steady… The mortgage-defining 10-year U.S. Treasury since October has traded above 1.70 percent and below 1.94 percent, today dead-center at 1.83%. To find 30-fixed mortgage rates with no points, add two percentage points to 10s, and you’ll get a perfectly good quote without talking with a salesperson or engaging a mortgage website.

…and very, very nervous… Markets are always nervous, but now is different. The bond market is always nervous about the Fed, but that’s not the issue now — the Fed says it’s out of the game unless a substantial change in the economy or inflation. Nervousness traces to the overseas potential to trigger economic change, and overseas forces are much harder for markets to evaluate than traditional U.S. measures like the ones described above.

Overseas Question One: Will the stimulus underway in Japan, China, and Europe, and a possible add-on in Europe cause a global economic rebound? Trade war has moved to back-burner, at least until after the election. Europe might begin concerted fiscal stimulus, just plain, old spending and borrowing, the European Central Bank facilitating the borrowing. On days when then 10-year T-note has been left undisturbed, no new stock market balloon and nothing dangerous overseas, 10s have moved up every time, looking as though about to test that 1.94 percent level. But each time intercepted by…

Overseas Number Two: Mr. Trump’s election boosted stocks and rates, but despite all of the noise from every political angle since then he has had little effect on anything economic, except the on-hold trade war. And it’s not just his presidency having little effect on markets. The economy and government at so many levels are so big, and 331,000,000 Americans so determined to do as we please, and our government is the least top-down structure of any in the world that it’s hard for presidents to have much effect.

Except overseas. Trade war last year was a good example. The world economy is more sensitive to trade than to any other event except one: war. Markets tanked on Tuesday’s news of Suleimani’s demise, but quickly recovered upon Iran’s mild countermove — until this morning’s new U.S. sanctions on Iran, suggesting that neither party is ready to cool it.

Soapbox: The US has rarely seen political polarity as extreme as today’s, perhaps only during Vietnam, America First 1939-1941, and the 1850s run-in to the Civil War. This polarity is magnified today by nearly every media source dedicated to exaggeration, in their desperate competition for eyeballs.

Be skeptical. We must second-guess ourselves and the sources we have trusted, and as often as possible withhold judgment on anything until gathering and chewing on disparate sources. This Suleimani week repeatedly affected mortgage rates in a storm of grotesque propaganda presented as news. Reality likely lies somewhere between Fox and kill-‘em-all (not even Fox could stay unanimous) and CNN’s “Eek!” Last night on CNN analysts with previously responsible journals blamed the U.S. for the shootdown of the Ukrainian airliner in Iran. Two Republican senators expressed white-hot fury at a White House anti-briefing.

Maybe the White House has entered a new phase of unrestrained belligerence. Maybe Suleimani’s demise changed Iran’s internal politics and it is now looking for face-saving ways to stand down. Maybe Suleimani’s end was the right thing to do but for impulsive reasons. Or the right reasons. Maybe we are poking at the wrong spot and will regret the response.

Every trading desk is mulling those questions now, every day, struggling in a cloud of misinformation. War is bad for business, but it does hold rates down.

The U.S. 10-year T-note in trading just this week. Suleimani’s end plain on the 7th, relief at Iran’s intentional missile misses on the 8th, and the effect of today’s new sanctions, traders buying bonds for safety over the weekend:

The internal dynamics of GDP estimation are just math, ignorant of the Middle East and steady as can be:

The ECRI is strengthening, perhaps because of reliance on Fed policy, but it’s track record is so good that it’s to be taken seriously, no matter why: