Markets are bananas. Welcome to August!

I’m Jonathan Levin, and this is Bloomberg Opinion Today, a volatility-packed compilation of Bloomberg Opinion’s opinions that may or may not [Bloomberg]( I’m Jonathan Levin, and this is Bloomberg Opinion Today, a volatility-packed compilation of Bloomberg Opinion’s opinions that may or may not leave you begging for emergency rate cuts from the Federal Reserve. Sign up [here](. Today’s Agenda - Dudley on [rate cuts](. - El-Erian on [who’s the boss](. - Sahm on the [Sahm]( rule. - Correction [downside risks](. - More [Musk]( than you [bargained]( for. - $75 [oil](. - And [FedEx]( vs. UPS. Economic Uncertainty It’s that time of year — when bizarre things tend to unfold in US markets, and we’re off to memorable start. Following Monday’s massive global stock selloff, markets bounced back yesterday, then suffered a dizzying intraday reversal on Wednesday to end the session a bit lower on the day. And we haven’t even arrived at Thursday (aka tomorrow), when the government will give a much-anticipated update to initial jobless claims in the suddenly wobbly US labor market! So what does it all mean? According to Bill Dudley, the macroeconomic circumstances have begun to suggest that the Federal Reserve needs to [reduce]( policy rates to get closer to estimates of the so-called neutral interest rate, which neither stimulates nor slows the economy. “The Fed could cut by either 25 or 50 basis points, depending on what the economic data show” between today and the next policy-making meeting on September 17-18, writes Dudley, who served as president of the Federal Reserve Bank of New York from 2009 to 2018. That may be so, but Mohamed A. El-Erian [insists]( that central bankers need to make decisions on their own terms and not get bullied by volatile markets. El-Erian notes that, in response to this week’s market mayhem, the Bank of Japan said it would maintain monetary easing for the time being. “Repeatedly over the last two decades, central banks have attempted to take the difficult but necessary steps to deal with economic and financial imbalances only to fold under market pressure,” he writes.  Speaking of risks, one of the reasons that many economists and traders have gotten jumpy all of a sudden is because of an indicator known as the Sahm rule, developed by Bloomberg Opinion columnist Claudia Sahm. The rule is based on the observation that, since 1970, the US is always in recession when the three-month average of the US unemployment rate is 0.5 percent point or more above the low of the prior 12 months. The current unemployment rate has now triggered the rule. So should we panic? As Claudia herself [wrote]( today, “the current Sahm rule reading is likely overstating the weakening in demand and not at recessionary levels.” Even so, she adds: “There are risks.” Nir Kaissar has one final note of cautious optimism in his latest column, [writing]( that there may not be room for a very large correction in the S&P 500 Index, provided analysts’ long-term earnings estimates are accurate. “But the market will have its say about the quality of the estimates in the coming days and weeks,” he says. Elon Musk One man who knows a thing or two about volatile markets is Elon Musk; some might say that Musk is volatility incarnate. True to form, the world’s richest man has seemed to bring his own unique form of chaos along with him everywhere he goes lately. Parmy Olson [writes]( that Musk has been fanning the flames of Britain’s far-right riots in recent days. “In fact, evidence suggests that falsehoods amplified on Musk’s platform have fueled the unrest—and the world’s richest man has faced little to no repercussions,” she writes. Parmy highlighted a post by Musk on his X platform in which he writes that “civil war is inevitable.” Back stateside, Musk has plenty of problems in the core business side of his empire. As Liam Denning [points out]( electric vehicle sales of battery EVs – including Musk’s Teslas – fell year-over-year in the second quarter in the “electric vehicle heartland” of California. Given the state’s explicit mandate to decarbonize new vehicle sales by 2035, you’d think public officials might be Musk’s side — but not necessarily. State officials, including Governor Gavin Newsom himself, dialed into a call this week to discuss the matter, and the governor actually took pains to downplay Tesla and talk-up competitor plug-in vehicles. Odds are that Musk isn’t exactly ingratiating himself with West Coast liberals by stoking violence in the UK. As Liam put it, “Newsom clearly isn’t a fan of Musk’s behavior either, but he’s probably also frustrated at the outsize impact Tesla’s slowing sales have on California’s green transportation ambitions overall.” Telltale Charts Turning from EVs to the old-fashioned oil market, Javier Blas has a [column]( about how OPEC+ will struggle to keep oil prices at about $75 a barrel. While global oil demand continues to increase, Javier says that “supply is a large problem for OPEC+.” He adds: “Non-OPEC production is increasing fast, led by the Americas.” Here’s another great chart from columnist Tom Black, [showing]( the diverging dynamics in a different part of the global economy: the shipping business. FedEx Corp. is winning some fans under Chief Executive Officer Raj Subramaniam, driving up shares 13% this year even as rival United Parcel Service Inc. tumbled 21% in the period. The divergence in the chart is telling, but Tom says that FedEx has some structural deficiencies to address before it can “match the effectiveness of UPS’ unified network.” Further Reading Kamala Harris’ [momentum]( a good sign for Justin Trudeau. — Matthew A. Winkler Boeing’s new [CEO pick]( is a safe choice, but it needs to think longer term. — Beth Kowitt KKR could find that the [communications]( business is tricky. — Chris Hughes It’ll take time to judge the [fallout]( in global markets. — John Authers The new Hamas chief holds a [veto]( on peace. — Marc Champion ICYMI Taylor Swift [canceled](bbg://news/stories/SHV7E9T0G1KW) concerts in Austria after an alleged terror plot led to arrests. Steve Mnuchin, who created the 20-year bond, now says it’s [time]( to kill it. Jamie Dimon is [skeptical]( inflation will get back down to 2%. Kickers A [wallaby]( got loose on a golf course. The ancestors of early [human “hobbits”]( were even shorter. An arena in Florida will now be called [Pitbull Stadium](. Notes: Please send outrageously incorrect Fed predictions (and feedback on this newsletter) to Jonathan Levin at jlevin20@bloomberg.net. 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