U.S. Fed's Kugler - Tariffs still likely to have significant economic effects

May 12, 2025 4:22 PM UTC

Fed Governor Adriana Kugler still sounds hawkish despite the somewhat reduced tariff risks.

Trump Tariffs: China and UK Precedents

May 12, 2025 8:02 AM UTC

 The U.S./China have announced major reductions in reciprocal tariffs to 10% with other measures postponed for 90 days.  Though the U.S. is still imposing an extra 20% due to fentanyl, China will likely make some moves that could also help to reduce this.  This is in line with our previous thinki

U.S. Fed's Barr - Fears tariffs could lead to persistent inflation

May 9, 2025 11:53 AM UTC

Fed's Barr fears both higher unemployment and persistent inflation as a consequence of the tariffs, comments that we see as on the hawkish side.

Household Divergence Into the Downturn?

May 9, 2025 10:55 AM UTC

Overall, the shock faced by the U.S. from tariffs is a negative supply shock, which can then be followed by job losses and restrained income and consumption growth.  This 2 round can be amplified if a hard landing is seen and quickens job losses, which would really hurt low income households. Howev

FOMC Likely to Remain Cautious Unless Economy Falls into Recession

May 7, 2025 7:43 PM UTC

Fed’s Powell made clear that with high uncertainty the Fed is in no position to move rates at this point, though how long that will persist is unclear. We see no reason to adjust our existing Fed call of only one easing in 2025, by 25bps in December, and two more in 2026. This would take the Fed F

U.S. Fed's Powell - Still in wait and see mode

May 7, 2025 6:46 PM UTC

Fed's Powell has provided no real surprises yet, in no hurry to move on rates while leaving options open.

FOMC leaves rates unchanged, sees increased risk on both sides of mandate

May 7, 2025 6:15 PM UTC

The FOMC has left rates unchanged at 4.25-4.5% as expected.  The main change in the statement is to note that the risks of higher unemployment and higher inflation have both risen, which gives little insight on any policy bias though suggests that the Fed could be responsive to data going forward.

China Moderate Triple Monetary Easing

May 7, 2025 6:31 AM UTC

•    China has announced a 10bps cut in the 7 day reverse repo rate to 1.4%; large than expected 50bps cut in the RRR rate and credit easing via Yuan1.1trn balance sheet quota expansion to counter the slowdown in growth.  Combined with the extra equity capital for state banks this will help c

Tariff Man

May 6, 2025 8:45 AM UTC

  With the U.S. equity market having rebounded, President Donald Trump instinct on tariffs have seen threats of pharma tariffs and a 100% tariff on non U.S. films. Slow progress is also reported on bilateral deals, despite White House PR spin.  However, Trump will see pressure rising from three so

Markets: China Truce Hopes and More Data

May 5, 2025 8:05 AM UTC

The direction of travel is towards a U.S./China truce followed by postponing/cancelling most reciprocal tariffs and then trade negotiations. While the markets could cheer this as good news, incoming economic data in May and June is the most critical issue.  We still see the U.S. imposing an average

FOMC Preview for May 7: No change with future policy left data-dependent

May 2, 2025 3:47 PM UTC

In the current exceptionally uncertain environment, the FOMC looks set to keep rates unchanged at 4.25-4.5% at its May 7 meeting, and give little away on future policy. This meeting will not see the dots updated. Chairman Powell however at the press conference is likely to signal that future meeting

U.S. Equities: Vulnerabilities Remain

May 1, 2025 10:25 AM UTC

 We are concerned that valuations remain high and inconsistent with nominal and real government bond yields going into a growth slowdown as tariffs hit the U.S. economy.  Our baseline is for the S&P500 to fall to 5000-5200 mid-year before recovering to 5500 by end 2025. The 10yr budget bill is lik

China South China Sea Tensions

April 30, 2025 10:30 AM UTC

We see recent China activity as part of the normal grey warfare for long-term influence in the South China sea.  It has involved the use of China coastguard and militia fishing boats rather than China PLA Navy, though the risk of escalation between the Philippines and China remains. China likely wa

U.S. Treasuries: Economy v Foreign Investors

April 29, 2025 8:32 AM UTC

We have not revised down our baseline for 10yr yields (Figure 1) in 2025 and have pushed forecasts up 10bps in 2026.  We are concerned that foreign investors will be less willing to buy extra U.S. Treasuries.  Nevertheless, the economic slowdown, plus expectations that the CPI boost will be a temp

US Exit: Lessons From Brexit?

April 28, 2025 8:05 AM UTC

Overall, the U.S. attempt to reshape global trade is unlikely to significantly improve its trade position, but the size and influence of the U.S. may mean it does not get hit in net exports volumes like the UK.  Even so, U.S. business investment could be restrained by ongoing uncertainty from the T

U.S/China Trade Standoff: Odds Remain Towards Truce

April 25, 2025 7:09 AM UTC

  On balance, our baseline still remains a U.S./China trade deal (55-60%) being reached, given Trump deal instincts; China desire for a deal and the economic disadvantage of an economic cold war to the U.S. when it is trying to reset trade with all countries.  Timeline is Q4 2025 or H1 2026. An al

USD Rebalancing: Some to EM?

April 24, 2025 8:30 AM UTC

Some portfolios rotations towards EM assets will likely be evident, as we see the USD decline is now extending and broadening.  However, flows will likely be selective, both given underwhelming EM performance in the last 5-10 years and the uncertainty over how much Trump will reduce reciprocal tari

U.S. Fed Beige Book Summary - Some signs of slowing on policy uncertainty

April 23, 2025 6:29 PM UTC

The latest Fed Beige Book shows activity little changed rather than increasing slightly while the labor market appears to have lost momentum. Inflationary pressures however persist. 

Trump Under Pressure

April 23, 2025 7:15 AM UTC

A deteriorating economic; volatile financial markets and weakening approval ratings are all putting pressure on the Trump administration to do trade deals.  However, Trump instincts means he still likes tariffs, while negotiations will not be quick with China restraints and non-tariffs list desired

Foreign Official U.S. Treasury Holders: The Kindness of Strangers

April 22, 2025 7:30 AM UTC

Official holdings of U.S. Treasuries show a mixed picture with China, Brazil and Saudi Arabia well off peak holdings. Two drivers of some of these country flows are the peak in global central bank FX reserve holdings in 2021 and an increased holdings of other currencies in the last decade.  Neverth

USD flows: Trump said looking for a new Fed Chairman

April 17, 2025 7:14 PM UTC

The USD is a touch weaker after the WSJ reported Trump has spoken with former Fed Governor Kevin Warsh about replacing current Fed Chairman Powell, though it appears Warsh is not interested. If Trump persists in his search, he will have trouble finding someone who will have the market’s trust. 

Safe Havens Other Than the USD

April 17, 2025 8:30 AM UTC

The USD and U.S. Treasuries are currently not acting like safe havens, as the crisis is U.S. centric with the tariff debacle. 10yr Treasuries can regain safe haven status if a U.S. recession occurs, but U.S. equities are still clearly overvalued versus equity and equity-bond metrics.  We prefer Ind

U.S. Fed's Powell - May find dual mandate goals in tension

April 16, 2025 5:45 PM UTC

Fed's Powell continues to give a message of keeping policy steady near term.

Nervous U.S. Long Term Asset Holders

April 15, 2025 8:30 AM UTC

   Overall, foreign equity investors can no longer count on U.S. exceptionalism and could face lower long-term corporate earnings growth, which at a minimum will likely slow net inflows.  Bond investors also face ongoing policy volatility, which likely means a need for an extra risk premium – t

U.S. Fed's Waller - Would back a dovish approach if tariffs stay high

April 14, 2025 5:43 PM UTC

Fed's Waller suggest he would be more dovish if high tariffs persist, despite a likely inflation spike. 

U.S./China High Stakes Poker

April 14, 2025 7:30 AM UTC

The economic hit from a hard stop in U.S. imports/exports is too damaging for both sides and our baseline is still for a truce and de-escalation, in the coming weeks. This could be negotiations on a new trade deal with a more moderate reciprocal tariff on both sides and the extra reciprocal tariffs

Volatile Treasuries But Economic and Foreign Holdings Key

April 11, 2025 9:30 AM UTC

Long-dated U.S. Treasury yields were being pushed up by deleveraging among leveraged players, before the 90 days pause on reciprocal tariffs easing deleveraging. Multi quarter the key question for yields is whether real sector data sees a soft or hard landing.  We see a slowdown to sub trend growth

U.S. Fed's Logan - Must prevent tariff-led inflation becoming persistent

April 10, 2025 1:44 PM UTC

Fed's Logan maintains a cautious approach to policy, with the tariff impact still to be seen.

Trade Deals with the U.S.: Pressures and Obstacles

April 10, 2025 7:17 AM UTC

Pressures to do trade deals include the weaker U.S. economy and higher inflation when it arrives/foreigners becoming nervous of their USD30trn plus holdings of U.S. securities and more crucially risks to Trump and GOP approval ratings from Republican voters. Obstacles to quick trade deals include Tr

FOMC Minutes from March 19 - Concerns inflation could prove persistent

April 9, 2025 7:13 PM UTC

FOMC minutes from March 19 contained no major surprises, though showed a significant degree of concern over inflation which justifies caution towards easing, with the inflationary concerns led by the prospect of tariffs. Even with Trump’s recent partial climbdown, the risks have probably gone up s

U.S. Fed's Kashkari - Tariffs make it harder to ease

April 9, 2025 3:15 PM UTC

Despite expecting economic weakness, Fed's Kashkari sees inflationary risks from tariffs as an obstacle to easing.

U.S China Trade War: Deal or No Deal Prospects?

April 9, 2025 9:00 AM UTC

The prospect of a trade deal between the U.S. and China are less and likely delayed into 2026, due to the hardline stance of Trump 2.0 due to the extra focus on tariff tax revenue and shifting production back to the U.S. It is still our baseline that a deal will be agreed though we would now see a d

Reciprocal Tariffs: The Hit To Other Countries

April 8, 2025 9:30 AM UTC

 Overall, we are still assessing the effects on non U.S. countries from the tariffs being imposed by the U.S. via direct trade/business investment/currency and financial & monetary conditions swings.  The impact will be adverse to GDP, but for some major countries could be less than the U.S.  How

U.S. Fed's Kugler - Inflation more pressing right now

April 7, 2025 3:50 PM UTC

Financial market turbulence does not appear to have changed the view of Fed Governor Adriana Kugler.

U.S. Equities: Hoping for Tariff Negotiations but Fearing Q2 Data

April 7, 2025 9:08 AM UTC

•    The U.S. equity market still remains under pressure from the announcement effect of large reciprocal tariffs, though hopes of trade deals could start to soon produce a stabilization of the market later this week.  Multi month the U.S. equity market outlook depends on whether a recession

U.S. Fed's Powell - Waiting for greater clarity, but clearly concerned

April 4, 2025 3:45 PM UTC

Fed's Powell shows concern about the inflationary impact of tariffs, which will imply a cautious approach to easing.

Tariffs: Inflation may be the biggest worry for the U.S.

April 3, 2025 4:12 PM UTC

While surprising the market in their intensity, Trump’s “reciprocal” tariffs were in line with previous threats on most countries, and with Canada and Mexico being treated less harshly that feared, the net surprise is modest to us. However we do feel that inflationary risks have increased furt

Taiwan: Grey Warfare or More?

April 2, 2025 7:05 AM UTC

   China grey warfare against Taiwan will continue, but we would only see a 5% probability of China invading Taiwan in 2025 and 2026.  The U.S. is pivoting towards Asia and China, while President Trump is not China friendly. A war with the U.S. over Taiwan would be very costly in military and eco

U.S. Trade Surplus Countries: No Special Treatment?

March 31, 2025 9:04 AM UTC

Quick dilutions of tariffs or exemption will likely be slow in coming for countries that the U.S. has trade surpluses with, as the Trump administration are currently more focused on tariffs for tax revenue and trying to switch production back to the U.S. than trade deals.  Trade policy uncertainty