Category Macro / Economy

Navigating Market Volatility, Tariffs and Recessionary Signals Navigating Market Volatility, Tariffs and Recessionary Signals

Navigating Market Volatility, Tariffs and Recessionary Signals

Despite the welcomed relief rally - stocks are not out of the woods. The uncertainty introduced from Trump has inflicted a lot of damage. Not only on the market and its earnings - but on investor, consumer and business confidence. However, the full extent of the damage will only be felt in the months (years) ahead. For example, Bankim Chadha of Deutsche Bank has reduced his target for the S&P 500 for the year, citing doubts over whether tariff policies will be abandoned before they have already driven the economy into a recession. This echoes what I said recently "we could already be in recession"

Trump’s Push for Lower Rates: Why the Bond Market and a 60% Recession Risk Stand in the Way Trump’s Push for Lower Rates: Why the Bond Market and a 60% Recession Risk Stand in the Way

Trump’s Push for Lower Rates: Why the Bond Market and a 60% Recession Risk Stand in the Way

Trump is demanding the Federal Reserve lower rates. However, Fed Reserve Chair Jay Powell - is having none of it (and nor should he). This is setting up another showdown between the President and the world's top central banker... a repeat of what we saw in 2018. As we all know Trump is a real-estate guy. Property is a business that relies heavily on cheap money. And this is the same lens Trump is taking with respect to his growth agenda. But he may not get what he wants...

The $1T Trade Deficit Myth: Why Tariffs Won’t Fix the U.S.-China Economic Relationship The $1T Trade Deficit Myth: Why Tariffs Won’t Fix the U.S.-China Economic Relationship

The T Trade Deficit Myth: Why Tariffs Won’t Fix the U.S.-China Economic Relationship

For the past few weeks we've watched Trump double down on dumb. There are no winners from tariffs - only losers. Perhaps the biggest loser of all will be the US consumer... forced to pay higher prices for almost all goods. Is that the goal? From Trump's lens - China has been "ripping the US off" for decades. Why does he think this? The President will cite the US' ~$1T trade deficit with the Middle Kingdom... which has doubled in 5 years. But this isn't necessarily a bad thing... here's why

The Pivot from Inflation to Growth: Are Markets Mispricing 2025? The Pivot from Inflation to Growth: Are Markets Mispricing 2025?

The Pivot from Inflation to Growth: Are Markets Mispricing 2025?

Some people are concerned about mounting inflationary risks. For example, it was only last week the Fed raised its inflation projections - where core inflation is expected to grow at a 2.8% annual pace, up 0.3 percentage points from the prior reading. And whilst inflation may remain sticky in areas like services and shelter (which I will talk to more shortly) - I think we should be more concerned with growth.

Consumer Confidence Sinks: Be Wary of this Market Bounce Consumer Confidence Sinks: Be Wary of this Market Bounce

Consumer Confidence Sinks: Be Wary of this Market Bounce

It was a roller-coaster week for stocks... maybe a hint of things to come? From mine, in the very short term, markets were deeply over-sold looking at its Relative Strength Index (RSI). Often when you see the RSI below a value of 30 - buying isn't too far away. The last time stocks sank ~10% over a few days was 2020. However, in the absence of any crisis, generally this will see both short covering and/or bargain hunting. The bigger question is whether stocks can follow through? I don't think we draw that conclusion yet...

The Carry Trade Unwind: How Yen Strength and JGBs are Sinking Tech Stocks The Carry Trade Unwind: How Yen Strength and JGBs are Sinking Tech Stocks

The Carry Trade Unwind: How Yen Strength and JGBs are Sinking Tech Stocks

Enjoying the ride so far? I guess it depends on how you were positioned. Even a genius can look like an idiot if they are caught out of position. Those who had excessive exposure to tech (or chips) may not be enjoying things. Most of their 2024 gains have been wiped out.
It doesn't take long when there's a rush to the exits. On the other hand - if you pivoted into value orientated names (which traded at more reasonable multiples) - things will look more positive

The Tariff Trap: Navigating Market Uncertainty and the Folly of Forecasting The Tariff Trap: Navigating Market Uncertainty and the Folly of Forecasting

The Tariff Trap: Navigating Market Uncertainty and the Folly of Forecasting

Approx 2 months ago - it felt like markets were starting to hedge their bets. How could I tell? Whilst the market was trading near record highs (around 6100) - momentum was fading. I commented on both the weekly MACD and RSI falling - whilst prices remained high. Technicians call this "negative divergence". Quite often it suggests prices are at greater risk of easing. Since then they've dropped ~6%. The week ending March 7th was the worst week for the year and the third straight week of losses... more to come? I think so...

The Fed’s Balancing Act: Why Market Liquidity Matters More Than Interest Rates The Fed’s Balancing Act: Why Market Liquidity Matters More Than Interest Rates

The Fed’s Balancing Act: Why Market Liquidity Matters More Than Interest Rates

Four things caught my eye with yesterday's release of the January Fed Minutes: (i) worries over tariffs and their impact on inflation; (ii) some members suggesting the fed funds rate is now close to neutral (not the majority); (iii) concerns over the pace of balance sheet reduction targets; and (iv) inflation needing to come down more before lowering rates further. Makes sense to me... But I can't help but wonder when Powell ran a victory lap last September - whether it was premature.

The Inversion of Growth: Why Private Investment is the Only Way Out of Debt The Inversion of Growth: Why Private Investment is the Only Way Out of Debt

The Inversion of Growth: Why Private Investment is the Only Way Out of Debt

With 10-year yields trading around 4.50% (with the possibility to go higher) - why haven't equities sharply corrected? It's a good question. For e.g., on the surface, one might think equities would struggle given the zero risk premium investors are receiving. But that has not been the case. The stock market has withstood the sharp rise in bond yields (for now anyway). However, I believe there is a simple explanation. It's the amount of liquidity in the system. Liquidity is abundant - evidenced by the very low credit spreads in the market (participants see very little risk). Generally credit spreads widening are your first sign of trouble.

The Anatomy of a Growth Scare: How Tariffs, Tightening, and Inflation Impact Markets The Anatomy of a Growth Scare: How Tariffs, Tightening, and Inflation Impact Markets

The Anatomy of a Growth Scare: How Tariffs, Tightening, and Inflation Impact Markets

We started this year with the market pricing in only "good things". We had (a) the Fed ready to continue its easing cycle; (b) business friendly administration looking to cut taxes and lower regulation; and (c) the promise 'limitless' returns from AI. Investor expectations were very high - evidenced by the valuation multiples they were willing to pay (whether it was P/E; P/FCF; EV/EBIT etc). Traders were all leaning to one side of the boat. However, shares prices have lost all momentum the past 12+ weeks.