On July 31, as stocks were sitting near record highs, the Fed officially changed direction on monetary policy, cutting rates (after a nearly four year tightening cycle) and stopping the shrinkage of its balance sheet. 

Then Trump escalated the trade war.

Stocks dropped by 4% over just three days, and finished down 1.8% for August . 

What did that (the trade war escalation) accomplish? 

By September, the rise in the probability of a prolonged trade war, and the rising probability of it turning into something more (an ultimate path toward military war), put global central banks on full alert, and in a defensive/risk management stance.  Maybe most importantly (for global financial market and economic stability), it forced the ECB to restart QE. 

So twenty days into September, and we now have the ECB vowing to buy 20 billion euros a month, indefinitely.  And we now have a second quarter point rate cut under the belt of the Fed.  We end the week with stocks up 2.5% month-to-date.   Year-to-date, stocks are up 20% (better than double the long-term average).  

So, let's ignore the noisy status of the trade talks for a moment. We can look back to the swoon in markets late last year, and the 20% gain this year, to new record highs, and attribute it to the mistakes and repentance of global central banks (namely the Fed and the ECB).  It was policy mistakes that have shaken markets ($17 trillion in negative yielding global sovereign debt), albeit these policy mistakes were due to their lack of willingness to adjust policy for the uncertainty of the trade war. 

Remember, as a consequence of the Fed's 'quantitative tightening' plan, the balance sheet of the three most powerful central banks in the world peaked in the third-quarter of last year.  Then the ECB started what they believed to be a path to follow the Fed's normalization program, by quitting QE in December of last year.  With the combination of the Fed's QT and the ECB ending QE, by the end of last month, almost a quarter of a trillion dollars was removed from the global economy.