Ten-year Treasury yields fell 16 bps this week, reversing about a third of last week’s spike. MBS yields dropped 19 bps after last week’s 56 bps surge. The U.S. Dollar Index declined 0.9%, adding to last week’s 2.8% drop. From the standpoint of primary markets suffering from a problematic waning of confidence, the week wasn’t much for relieving concerns.
As for Credit, the jury is also out.
April 14 – Financial Times (Eric Platt and Will Schmitt): “America’s risky corporate borrowers have been shut out of the bond market since Donald Trump’s tariff blitz, in a freeze that is reverberating across Wall Street and which threatens a tentative rebound in dealmaking. Lowly rated companies have failed to sell any debt in the $1.4tn US high-yield bond market since the president unleashed market turmoil and raised fears of a US recession with the wave of tariffs he announced earlier this month. The freezing of the junk bond market threatens to hit private equity groups that frequently rely on it to help fund their takeovers. It also raises the risk for banks that provide short-term loans for such deals before buyout firms then secure longer-term financing… ‘Everything has been on hold,’ said Bob Kricheff, the head of multi-asset credit at… Shenkman Capital Management. ‘Nobody is trying to price a deal in this environment.’”
April 17 – Bloomberg (Caleb Mutua): “The US leveraged-loan market’s streak without a deal launch has reached record levels as tariff volatility crimped activity this month across primary credit markets… Wednesday marked the 14th consecutive session without a new loan, the longest no-launch streak since Bloomberg started to compile the data in 2013…”
April 17 – Bloomberg (Jeannine Amodeo, Aaron Weinman and Gowri Gurumurthy): “Wall Street banks are stuck with $2.35 billion in debt for the buyout of Patterson Cos., the second time lenders have been left on the hook for a big financing package since the Trump administration triggered a global trade war.”
The junk bond market opened for LNG developer Venture Global to price an upsized $2.5 billion deal, the first issuance in two weeks. Junk yields (Bloomberg High Yield) dropped 38 bps to 8.19%, having now retraced less than half the spike from the 7.62% yield on April 2nd. Junk yields ended February at 7.15%. After widening 119 bps in the four sessions ended April 8th to 453 bps, high yield spreads have narrowed 55 bps to end the week at 398 bps. Leveraged loan prices recovered 36 bps to 95.11 – after sinking 162 bps over the previous two weeks. High yield CDS declined six this week to 424 bps – after beginning the month at 375 bps (292bps on February 19th).
April 15 – Financial Times (Harriet Clarfelt): “A cornerstone of demand in the $1.4tn US junk loan market is under pressure to sell very risky debt… Collateralised loan obligation vehicles, which own roughly two-thirds of US riskier corporate loans, may need to slash exposure to weaker borrowers most vulnerable to tariffs and recession because of the potential threat of rating downgrades… The heightened pressure on CLOs is the latest sign of how fears that Trump’s tariffs could sharply slow US growth are rippling through the corporate debt market… ‘Whether it’s a recession, a mild recession, a slowdown in growth — at the minimum, we’re going to have a slowdown,’ said Roberta Goss, head of Pretium’s bank loan and CLO platform. ‘That will have implications across the credit markets — and in leveraged finance, that’s going to result in elevated defaults and elevated downgrades over the course of the next year.’”
There is little so far that indicates Credit is out of the woods. While well off panic levels, unease overhangs the stock market. The VIX index declined 7.9 to 29.7, still up significantly from the 21.5 July 2nd close. Stocks were making some headway until Thursday’s 2.2% drop (S&P500). Much of the decline came after Chair Powell began his presentation at the Economic Club of Chicago.
Below are excerpts from his opening remarks and discussion with University of Chicago professor and former Governor of the Reserve Bank of India, Raghuram Rajan. As one of the world’s foremost central bankers, Dr. Rajan was the perfect moderator at a most opportune juncture for a chat with the Fed Chair.
Chair Powell, presenting at the Economic Club of Chicago, April 16, 2024: “Looking forward, the new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. Those policies are still evolving, and their effects on the economy remain highly uncertain. As we learn more, we will continue to update our assessment. The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth. Both survey- and market-based measures of near-term inflation expectations have moved up significantly, with survey participants pointing to tariffs.”
Chair Powell: “I mentioned in my remarks, [the administration] is implementing significant policy changes, and particularly trade now is the focus. And the effects of that are likely to move us away from our goals. So, unemployment is likely to go up as the economy slows, in all likelihood, and inflation is likely to go up as tariffs find their way and some part of those tariffs come to be paid by the public. So that’s the strong likelihood. And my hope is that we’ll get through this and get back. Look, we’re always going to be aiming for maximum employment and price stability. That’s what we do. I do think we’ll be moving away from those goals probably for the balance of this year – or at least not making any progress. And then we’ll resume that progress as we can.”
Raghuram Rajan, University of Chicago: “What’s your sense about the effects of tariffs on inflation? What would make them more persistent? And what would make them have effects on growth?”
Chair Powell: “In a kind of simple starting point is a tariff comes in that gets passed along in prices and raises inflation. But it’s just a one-time thing… But that can happen in some circumstances, but it depends on a number of things which we don’t know yet. And I would point to… three of them… One is just the size of the effects. And as I mentioned, the tariffs are larger than forecasters had expected, certainly larger than we expected even in our upside case… The second one is how long does it take for the tariffs to have their effects on inflation? To the extent it takes longer and longer, that raises the risks that the public will begin to experience higher inflation. They’ll come to expect it, and companies will come to expect it, so that risks higher inflation. And the third is… gotta keep inflation expectations well-anchored. So, if we have those three things under control, that’s what it will take. And, indeed, our role is to make sure that this will be a one-time increase in prices, and not something that turns into an ongoing inflation process. That’s a big part of our job.”
“So, all of this is highly uncertain. We’re thinking now really before the tariffs have their effects – how they might affect the economy. We’re waiting really to see what the policies ultimately are, and then we can make a better assessment of what the economic effects will be.”
Raghuram Rajan: “Now… we’re talking about the future. You may be confronted in the not-so-distant future with both higher levels of unemployment, as well as potentially higher inflation. And of course, the policies that each one requires could be different. You’ve talked a little bit at the podium about how the Fed would see these two, and how it would address it. Just give you a chance again to elaborate on that.”
Chair Powell: “Right, so most of the time, when the economy is weak, inflation is low, and unemployment is high, and both of those call for lower interest rates to support activity, and vice versa. So, most of the time, the two goals are not in tension, and they’re not really in tension now. The labor market is still strong. But the shock that we’re experiencing, the impulses we’re feeling are for higher unemployment and higher inflation. And, you know, our tool only does one of those two things at the same time. So, it’s a difficult place for central banks to be in in terms of what to do.”
“What we say is we will look at how far each of the two – how far the economy is from each of those two goals, and then we’ll ask, might there be different paces at which they would approach those goals? We’ll look at those things and think about them, and we’ll no doubt be a very difficult judgment. Again, we’re not – we’re not experiencing that now, but we could well be in that situation…”
Raghuram Rajan: “How do you take such longer-term uncertainty into account in your policies?”
Chair Powell: “What comes back very strongly, everyone will understand this: these are very fundamental policy changes in long held, in some cases, policies in the United States, and there’s not any real experience. I mean, the Smoot-Hawley tariffs were actually not this large, and they were 95 years ago. So, there isn’t a modern experience of how to think about this. And businesses and households are saying in surveys that they are experiencing incredibly high uncertainty.”
“I mean, your question really is, what if the uncertainty remains high? I think that’s a difficult environment. I think people’s expected rates of return would have to be higher. I think it would weigh on, to me, investment just in general. If the United States were to become a jurisdiction where risks are just structurally higher going forward – that would make us less attractive as a jurisdiction. We don’t know that at this point, but I think that would be the effect.”
Raghuram Rajan: “Some people believe the Fed will intervene if the stock market plummets, the so-called Fed put. Are they correct?”
Chair Powell: “I’m going to say no, with an explanation. So, what I think is going on in markets is markets are processing what’s going on. And it’s really the policies, particularly trade policy. And, really, the question is where’s that going to come in? Where’s that going to land? And we don’t know that yet. And until we know that, you can’t really make informed assessments that would still be highly uncertain once you know what the policies are. It’s still highly uncertain what the economic effects will be. So, markets are struggling with a lot of uncertainty, and that means volatility. But having said that, markets are functioning. Conditional on being in such a challenging situation, markets are doing what they’re supposed to do. They’re orderly and they’re functioning just about as you would expect them to function.”
Clearly, there is some de-levering going on among hedge funds in levered trades and things like that. It’s also, again, it’s the markets processing historically unique developments with great uncertainty. And I think you’ll probably see continued volatility. But I wouldn’t try to be definitive about exactly what’s causing that. I will just say markets are orderly and they’re functioning kind of as you would expect them to in this time of high uncertainty.”
Raghuram Rajan: “You mentioned amongst the issues you were focused on was the U.S. fiscal situation. Well, clearly, U.S. sovereign debt continues to rise. And what are your thoughts on the longer-term implications for interest rates and economic stability? How much further can we go in terms of national debt before we cross a line that might be unsustainable in the long-term?
Chair Powell: “U.S. federal debt is on an unsustainable path. It’s not at an unsustainable level. And no one really knows how much further we can go. Other countries over time have gone much farther, but we’re now running very large deficits at full employment. And this is a situation that we very much need to address. Sooner or later, we’ll have to, and sooner is better than later.”
“In terms of my time working on these issues, it’s not the Fed’s issue. But if you look at a pie chart of federal spending, the biggest parts and the parts that are growing are Medicare and Medicaid, Social Security, and now interest payments. And so that’s really where the work has to be done – and are issues that can only be touched on a bipartisan basis. Neither party can figure out what to do without both parties being at the table. So that’s critical.”
“All of this domestic discretionary spending, which is essentially where 100% of the conversation is, is small as a percentage of federal spending, and it’s already declining as a percentage of federal spending. So, when people are focusing on cutting the domestic spending, they’re not actually working on the problem… I just like to make that point because so much of the dialogue that the politicians offer is about domestic discretionary spending, which is not the issue.”
Chair Powell: “I think our banking system is well-capitalized with liquidity and is quite resilient right now to the kinds of shocks that it may face. I do believe that… In terms of the non-bank financial sector, it’s grown enormously. The provision of credit by non-banks has grown just really fast. Most of it has been funded though with a private equity-like structure, where it’s limited partners who are signed up for 10 years… They’re not depositors who can run… To your point though, Raghu, this very fast-growing and now quite large ‘private credit’ part of the economy has not really been through a significant credit event or a significant – it’s really grown since the pandemic.”
Chair Powell: “Our independence is a matter of law. Congress has in our statute: we’re not removed except for cause. We serve very long terms, seemingly endless terms. So we’re protected in the law. Congress could change that law. But I don’t think there’s any danger of that. Fed independence has pretty broad support across both political parties – in both sides of the Hill. So, I think that’s not a problem… We’re never going to be influenced by any political pressure. People can say whatever they want. That’s fine. That’s not a problem. But we will do what we do strictly without consideration of political or any other extraneous factors.”
The Fed Chair left much to contemplate. Rather than the typical “Balanced Powell,” he was uncharacteristically direct. Pulling no punches, Powell sees the administration’s policies as creating extraordinary risk: “I mean, the Smoot-Hawley tariffs were actually not this large, and they were 95 years ago. So, there isn’t a modern experience of how to think about this.” “Our role is to make sure that this will be a one-time increase in prices.”
The likely scenario would be one of higher inflation with lower growth (and rising unemployment). This Fed’s two mandates will be in “tension” – “a challenging situation” – and the Federal Reserve doesn’t really have a solution. It was almost as if Powell was telling the administration, “You break it, you own it.”
Nervous markets instead want to hear something to be interpreted as, “If they break it, we’ll fix it.” Powell’s message was that markets were functioning pretty well under the circumstances. Powell: “Markets are doing what they’re supposed to do.” Markets: “We hate this, and we want your assurance that the Fed is ready to do what you’re supposed to do.”
It’s such a fascinating environment. Recall that Fed Governor Powell was initially skeptical of QE, expressing concerns and only reluctantly supporting quantitative easing in 2012. Believe it or not, I think Powell in his heart believes markets should stand on their own. The pandemic crisis was unique, and the Fed now recognizes the massive QE response unleashed inflationary forces that have proved difficult to contain.
Powell’s comments confirm the analysis that the Fed is poised to be slow with another round of market-supporting QE. The President is none too pleased, saying Powell is “playing politics.” And perhaps Powell (and the Fed more generally) believes it is left to the markets as the only counteracting force with the power to compel the administration to change course on dangerously misguided tariff policies. Instead of coming to the markets defense, let the administration deal with market instability of the administration’s doing. Tough medicine, but in the end better for everyone.
In the same vein, Direct Powell threw ice water on DOGE and the administration’s discretionary spending-cut focus. “When people are focusing on cutting the domestic spending, they’re not actually working on the problem.” “Neither party can figure out what to do without both parties being at the table.” Perhaps in the back of Powell’s mind is the rational thought that only bond market discipline will force Washington to begin dealing with a debt problem at the cusp of spiraling out of control.
As is typical, recent deleveraging was halted by a policy response. But instead of the Fed coming to the market’s defense, it was the administration’s 90-Day Tariff Pause. Good enough for a squeeze and reversal of hedges, but I seriously doubt marginal tariff retreats will restart “risk on” and leveraged speculation. Instead, fragile markets face ongoing risks and uncertainty, with Fed liquidity support unusually ambiguous.
I’m sticking with the analysis that the great Bubble has been pierced, with markets vulnerable to what will be a problematic second round of deleveraging. Highly uncertain market liquidity prospects will continue to pressure the leveraged speculators.
April 17 – Reuters (Howard Schneider): “U.S. President Donald Trump… launched a series of attacks against Federal Reserve Chair Jerome Powell, accusing the central bank chief of ‘playing politics’ by not cutting interest rates, asserting he had the power to evict Powell from his job ‘real fast,’ and looking forward to the day when Powell was gone. Powell’s termination as Fed chair ‘cannot come fast enough’, the president said in morning comments posted to social media… ‘The Fed really owes it to the American people to get interest rates down. That’s the only thing he’s good for,’ Trump said. ‘I am not happy with him. If I want him out of there, he’ll be out real fast believe me.’”
Powell: “We’re never going to be influenced by any political pressure. People can say whatever they want. That’s fine. That’s not a problem. But we will do what we do strictly without consideration of political or any other extraneous factors.”
Markets are too fragile right now for this fight. But can the President control his anger? Powell is clearly not backing down – let alone pandering. And President Trump seems unusually agitated. His new tariff regime is a mess. China is anything but backing down, with perhaps the administration is beginning to realize this trade war game of chicken is one very high-risk gamble. They also have potential big issues with their game of chicken with Iran.
“Trump Ready to “Move On” From Ukraine Peace Talks If No Progress.” “US Open to Recognizing Crimea as Russian in Ukraine Deal.”
CNN’s Jim Sciutto (April 18, 2025): “If the Trump administration walks away, not just from these peace talks, but from Ukraine – it washes its hands of the war and ceases U.S. military support for Ukraine. What happens then? Can Ukraine, on its own and with European support, keep fighting?”
Retired General Wesley Clark: “I think Ukraine has to keep fighting. But I don’t think it’s likely to be very successful in the long-term because of [Russia’s] overpowering manpower strength – plus China, Iran, North Korea providing assistance. And I’m already hearing that the administration is not only preparing to walk away – but prepared to put pressure on our allies not to support Ukraine. And possibly by using tariffs as leverage against our allies not to support Ukraine. It’s a horrible negotiating strategy. We’ve made one concession after another to Moscow, and we’ve never gotten anything for it. And these poor people in Ukraine are fighting for the very values that we Americans hold dear. It is just inconceivable.”
I’ll assume it’s a false rumor that the administration is considering using tariff policy to force the European to withdraw Ukraine support. That would be a new low that would provoke an intense – and potentially destabilizing – response. The administration has instigated too many conflicts – none going well. And I worry about the President’s temperament and how he might react to myriad materializing challenges to his breakneck pursuit of unchecked power – at home and abroad.
If he lashes out, it seems Powell would provide the easiest target. With markets fragile and vulnerable to deleveraging’s next phase, how quick might the Powell Fed come to the markets’ defense with the Chair under ruthless attack? Troubling times.
April 18 – Associated Press (Bernard Condon): “Among the threats tariffs pose to the U.S. economy, none may be as strange as the sell-off in the dollar. Currencies rise and fall all the time because of inflation fears, central bank moves and other factors. But economists worry that the recent drop in the dollar is so dramatic that it reflects something more ominous as President Donald Trump tries to reshape global trade: a loss of confidence in the U.S… ‘Global trust and reliance on the dollar was built up over a half century or more,’ says University of California, Berkeley, economist Barry Eichengreen. ‘But it can be lost in the blink of an eye.’”
From Thursday’s Tactical Short Quarterly Call, “Decades of Inflation Home to Roost.”
I’ll begin how I ended recent calls. I so hope my analysis is wrong, and this is said with deepest sincerity. I’ve analyzed many bubbles. In particular, I can point to the 1997 “Asian Tiger” bubble collapse; 1998, with Long-Term Capital Management and Russia collapses; and the mortgage finance bubble collapse in 2008. In each case, my analysis pointed to quite problematic bubble excess. And in each collapse, things proved worse than what I had earlier considered a worst-case scenario.
I see evidence suggesting history’s greatest bubble has been pierced. This is not the first time I’ve harbored such thoughts. I’ve intensely monitored this multi-decade bubble since the early nineties. I thought the bubble had burst with the collapse of the Internet and technology stocks in 2000/2001. I reversed course in early 2002 with my warnings of an unfolding mortgage finance bubble. I was pretty convinced the bubble had burst in Q4 2008. I reversed course in March 2009, warning of an unfolding global government finance bubble. Then, it looked like the bubble had finally burst with the pandemic crisis in March 2020, but it quickly became clear that egregious monetary and fiscal stimulus had triggered “blow off” bubble excess. To be sure, reckless monetary inflation will never resolve bubbles. It ensures they inflate to only more precarious extremes.
Let me explain why I don’t expect to reverse this call for the bubble’s demise. I’ve argued for years now that the global government finance bubble was the “granddaddy of all bubbles.” Bubble dynamics had finally directed subversive forces to the heart – the bedrock of global finance – to trusted sovereign debt and central bank credit. With momentous consequences, bubble dynamics seized control of perceived safe and liquid “money-like” credit instruments that are subject to insatiable demand.
I’ve argued the government finance bubble is the end of the road. Previous burst bubbles spawned bigger bubbles necessary for system reflation – collapsing telecom debt and junk bonds were supplanted by a much bigger boom in mortgage credit. The mortgage finance bubble collapse unleashed a historic expansion of government debt and central bank liabilities. However, there is today no fledgling colossal bubble waiting in the wings to take bubble inflation to even greater extremes.
And while the inflation of government debt and central bank balance sheets is certain to continue, the trajectory of over-issuance increasingly risks a loss of confidence. I believe markets – notably sovereign bond markets – have begun to signal an evolving crisis of confidence – one that even risks a catastrophic loss of faith in the foundation of global finance.
Last week was extraordinary. A deeply systemic global deleveraging was unfolding – with instability and acute stress slamming markets worldwide. Yet the typical flight to Safe Haven Treasuries and the U.S. dollar was nowhere to be seen. Indeed, Treasury yields spiked 50 bps – the largest weekly move since October 2001. The dollar sank 2.8%.
Understandably, such confounding market developments sparked anxiety and debate. Was the highly levered Treasury “basis trade” unwinding? Were foreigners backing away from U.S. financial assets? Could the Chinese be selling Treasuries as part of a trade war counterattack? Did last week mark a momentous infection point in the era of the U.S. as the reliable anchor of global finance? Were markets perhaps even signaling the undoing of U.S. “exorbitant privilege” and “American exceptionalism”?
It’s difficult to believe stocks hit all-time highs less than two months ago. So much has changed – as if the world is being turned upside down. We live in a critical period in history. For starters, we’re witnessing the transition from a multi-decade boom cycle to a new cycle of utmost uncertainty. Systems are in the throes of monumental transformational change, instability, turbulence, and uncertainty. I chose the title “Decades of Inflationism Home to Roost” for today’s call, intending to expand on analysis I hope provides a little clarity to developments in the process of dismantling conventional wisdom.
When I took my first investment management position at a hedge fund in 1990, total U.S. non-financial debt was $10 TN, with outstanding Treasury securities at $2.2 TN. The Fed’s balance sheet came in at $315 billion – about Elon Musk’s current net worth. Fast-forward to the end of 2024. Treasury securities have reached $28 TN; total non-financial debt $77 TN; and the Fed’s balance sheet $6.8 TN. For decades, Federal Reserve officials, the economics community, and Wall Street all trumpeted the exceptional age of price stability. They glorified an enlightened Federal Reserve that had slayed the inflation dragon and achieved price stability.
But it was deeply flawed analysis. Recent decades have experienced historic credit inflation – monetary inflation with far-reaching consequences. From my earliest Credit Bubble Bulletins back in 1999, I’ve tried to highlight all aspects of what for centuries was labeled “inflationism”. Since my 1990 introduction, I have had deep appreciation for Austrian economics, especially its focus on the distorting effects credit inflation has on price structures, financial and economic structural development, and society more generally. Importantly, credit expansions have myriad inflationary impacts – higher consumer prices being only one. There are effects on asset prices and speculation, along with distortions in investment decisions, resource allocation, and economic structure.
The great German economist Kurk Richebacher was prescient when he repeatedly warned that asset inflation and bubbles were much more dangerous than rising consumer prices. Credit inflation and asset bubbles fuel over-consumption, trade deficits, and currency devaluation. The deleterious effects of deranged credit and inflationism include inequality, deep structural maladjustment, and an insecure, distrustful, and resentful society.
I believe the rise of Donald Trump and the populist MAGA movement is the consequence of decades of monetary mismanagement and pernicious inflationism. President Trump is such a divisive figure. In a CBB after the election, I wrote that half the country believes “nation saved” – the other half, “nation doomed”. No hyperbole there. Families, organizations, and communities are split, the country is spilt – along with the world. It’s impossible to analyze the current environment without an emphasis on one of history’s most powerful individuals and his new administration. So, if you disagree with my analysis – you see it as uninformed, politically ignorant – if you believe I suffer from TDS – “Trump derangement syndrome” – I understand. I get emails saying all of that and worse every week. I hope we can agree to disagree and focus on analyzing today’s precarious environment.
Not only is the Trump phenomenon a product of inflationism, I believe the President’s policy course has pierced history’s greatest bubble. Bubble collapse was inevitable. So, I won’t hold him responsible for decades of bubble excess. He’ll share blame with many for the post-bubble environment. But I certainly fear his policies will greatly exacerbate social, political, and geopolitical instability.
I’ve long feared the social and geopolitical consequences of decades of inflationism and bubble excess. Bubbles are, after all, at their core mechanisms of wealth redistribution and destruction. Corrosive inequality has become such a critical societal and political issue – at home and abroad. For the most part, the wealth destruction nature of bubbles remains masked so long as bubbles inflate. And with the great bubble now pierced, the specter of epic waste and structural maladjustment will begin to be revealed.
Society is already insecure, fractured, and bitter. Trust in our institutions has sunk to alarming depths. This also a global phenomenon. Little wonder this is the era of the “strongman” ruler, with populations gravitating to persuasive individuals championing anti-establishment populist agendas with the promise of security, retribution, and forceful change.
Today, half the country is certain Donald Trump is the right person at the right time – the other half convinced he’s the wrong person at the wrong time. I identify with the latter. Especially as the great bubble culminated in crazy excess, extending into a fourth decade, my concerns for post-bubble societal and geopolitical instability only deepened.
An already deeply polarized society couldn’t be more poorly situated for the bursting bubble. It’s become a tinderbox – and it’s difficult to envisage a President with a greater capacity to inflame. I believe this unfolding bursting bubble, with dreadful effects on markets and the economy, will create a precarious backdrop for the administration’s culture war fixation. I’ve always believed that holding society together post bubble would present a major challenge of paramount importance. These days, I have serious worries about scenarios that previously seemed “lunatic fringe.”
The consequences of decades of inflationism could be even more dangerous from a geopolitical perspective. I’ll repeat a general framework I’ve shared previously that I believe helps explain the rapidly deteriorating global environment – what is shaping up to be a breakdown of the existing world order: Bubbles are mechanisms of wealth redistribution and destruction – with detrimental consequences for social and geopolitical stability. Boom periods engender perceptions of an expanding global pie. Cooperation, integration, and alliances are viewed as mutually beneficial. But late in the cycle, perceptions shift. Many see the pie stagnant or shrinking. A zero-sum game mentality dominates. Insecurity, animosity, disintegration, fraught alliances, and conflict take hold.
From a geopolitical perspective, President Trump simply could not be more polarizing. It’s like the great disruptor is taking a sledgehammer to the brittle global order. And it’s alarming to see such fracturing, animus, and conflict heading right into deflating bubbles. Certainly, an unstable and rupturing world – and faltering bubbles – are not coincidental.
Donald Trump has been lamenting trade deficits for 35 years. I haven’t been a fan myself. But I can’t imagine a more perilous juncture to experiment with the most disruptive tariff regime in a century. Markets and economies are too fragile – fraught global relationships and alliances too frail. The President will wield his phenomenal power and coerce trade concessions. But will it prove a Pyrrhic victory? If my bursting bubble analysis is correct, a focus on bolstering our nation’s security and well-being would emphasize strengthening relationships with friends and broadening our alliances. We’ll need all of them.
The unfolding trade war with China is alarming. Hopefully cooler heads prevail. Perhaps President Trump will make more concessions. But there is clearly potential for this war to spiral out of control – during a precarious juncture for such a fight.
Chinese officials have stated they’re ready to “fight to the end.” I don’t think they’re bluffing. They’ve been preparing for this scenario for months, if not years. The President and his team, along with most analysts, believe the U.S. goes into this confrontation in a much stronger position than China. China is suffering from a real estate collapse, stagnation, and fragile finance, while most assume markets and the economy in the U.S. are structurally robust.
Conventional analysis fails to recognize our system’s acute bubble fragilities. Beijing likely comprehends U.S. vulnerabilities more adeptly than Washington. I’ve written that President Trump’s tariff policies have pushed our system to the edge – and pondered whether Xi Jinping will resist the urge to provide a nudge.
There is surely no greater priority for Xi Jinping than to see the downfall of so-called U.S. “exorbitant privilege.” This competitive advantage has for decades provided incredible benefits to China’s global superpower adversary. We enjoy the extraordinary benefits of having the world’s safe haven Treasury market – and the most robust financial markets generally – coupled with the globe’s dependable reserve currency. Now, President Trump has unwittingly exposed U.S. bubble fragility. This vulnerability, combined with reckless policymaking, puts U.S. markets, the American economy, and the dollar at great risk. Today, our financial system and economy are too fragile for misguided and haphazard risk-taking.
The U.S. and China each have a tremendous amount to lose from a trade war. But the administration and most analysts don’t appreciate that Beijing has much to gain. This trade war presents Xi Jinping with a unique opportunity in history. A global financial crisis would create challenges and risks. But blame would be directly cast on Donald Trump. The Chinese population is rallying around Xi and the communist party, a timely deflection of blame away from Beijing’s own policy blunders and mismanagement.
A Trump global crisis would also afford China a great opportunity to expand its close circle, its alliances, and its global influence. In the battle for global supremacy, one superpower would be expanding alliances and relationships, with the other at risk of being discredited and in retreat. Beijing might also calculate that a U.S. in disarray would be less compelled to exert influence throughout Asia – and less likely to come to Taiwan’s defense. A world with a wounded U.S. would be a playground for China and Russia. And for Beijing and Moscow, a world without U.S. “exorbitant privilege” would be a dream at long last coming true. It’s rational for Xi Jinping to accept short-term pain for the prospect of a level playing field that ensures China’s destiny as the supreme global power unencumbered by U.S. repression. Might Beijing do a cold, strategic calculation – and go for the jugular?
The stakes couldn’t be higher. Secretary of Defense Hegseth recently traveled to meet with Asian allies, vowing to strengthen U.S. resolve against China’s aggression. Days later, China launched major live-fire military exercises that simulated a blockade around Taiwan – while issuing stern warnings directed at the U.S.
Last week’s market behavior was fascinating, including a remarkable one-day rally following the tariff pause. At least for a day, markets dismissed President Trump’s China trade war escalation. But as yields spiked higher through the end of the week, concern shifted to whether China might be trimming its large Treasury holdings.
The administration – especially Treasury Secretary Bessent – keeps repeating what a big mistake China is making – that they’re playing with a weak hand – “a pair of twos”, as described by Bessent. For an administration that has specifically stated the objective of lowering long-term market yields, to have its trade war adversary sitting on an estimated $760 billion of Treasuries is not a “weak hand”.
There are big problems if these two adversaries refuse to back down. The world is in the throes of a major deleveraging – a dynamic that could easily spiral out of control. Just last week, global markets were at the cusp of seizing up. The leveraged speculators were caught on the wrong side of dislocating markets, forced to liquidate stocks, Treasuries, sovereign and corporate debt, and commodities. Acute stress developed across derivatives markets, notably in interest-rate and currency “swaps” markets integral to hedging strategies.
Deleveraging is a really big deal. Secretary Bessent last week called it “normal deleveraging.” And there’s some justification for complacency. There were flareups over recent years soon forgotten – the October 2022 Liz Truss UK gilts episode; the March 2023 bank run mini-crisis; and then last August’s yen “carry trade” instability. In all cases, quick policy responses reversed nascent deleveraging – and in no time it was right back to leveraging and speculating business as usual.
The last sustained deleveraging erupted with the March 2020 pandemic panic. Many of the indicators I closely monitor – CDS prices, credit spreads, risk premiums, derivatives pricing, and such – recently posted their biggest moves since 2020. This is serious and won’t be resolved with tariff concessions. Once deleveraging starts, the liquidation of positions and the unwind of speculative credit drive lower market prices and waning liquidity – a dynamic that spurs risk aversion and the impetus to reduce speculative leverage. When deleveraging is quickly reversed, the impact of waning liquidity, contagion, and risk aversion is thwarted before momentum is gained. But deleveraging attained powerful momentum last week on a systemic basis – across global markets. An ebb and flow would be typical, but it’s likely too late to get the genie back in the bottle.
A meaningful tightening of financial conditions has developed. Corporate debt issuance has slowed to a trickle. Importantly, junk bond and leveraged loan prices came under significant pressure. This needs to be reversed quickly. Our system is now years into a major “subprime” lending boom, exemplified by the imprudent ballooning of so-called “private credit.” High risk lending is always a seductively rewarding endeavor during boom times – boundless eager borrowers willing to pay exorbitant rates to finance all sorts of things. And so long as credit is readily available, a lot of overstretched and crooked borrowers will stay current on their obligations – borrowing from Peter to pay Paul – borrowing against inflated asset prices for fun and pleasure. But let there be no doubt, this is a game of musical chairs – a Ponzi scheme. When finance tightens and borrowers lose access to new borrowings, the party ends abruptly and the downside of the credit cycle takes on a life of its own.
Markets are signaling tighter finance and rapidly escalating credit concerns. There was an article a couple weeks back that highlighted the ranking of communities by the highest average household credit card balances. No surprise, California dominated the top slots. At number one, average households in Santa Clarita were carrying $22,753 on their credit cards. Chula Vista placed second at $20,567. These are wealthier communities, so I have to assume that stomaching such expensive debt was part of a strategy of plowing cash into the booming stock market.
This illustrates a fundamental vulnerability that is not well appreciated by mainstream analysts. Households have never been as exposed to stocks. A bursting equities market bubble will come with negative wealth effects and more cautious consumers. It will also expose extraordinarily problematic over-indebtedness – even for higher income households. The marketplace has started to back away from high-risk consumer credit – which will force companies to tighten credit limits and lending more generally.
From my Austrian economics roots, I often refer to the U.S. as a “bubble economy”. Bubble economies appear sound – even robust – so long as financial conditions remain loose, credit growth strong, asset prices inflated, and spending and investment elevated. However, problems fester below the surface. Vulnerability is revealed as conditions tighten. Well, conditions have tightened significantly.
It is central to my bubble thesis that uneconomic and negative cash flow enterprises have proliferated throughout this most protracted period of ultra-easy “money”. I believe years of deranged finance have come home to roost. Unless conditions loosen quickly and debt markets get back open for risky borrowers, we’ll see a ramp up of layoffs and business failures. There’s already been a collapse in small business confidence. When financial conditions remained extraordinarily loose, my analysis pointed to a tenuous continuation of “bubble economy” dynamics. Now, I believe a downturn has begun, with the potential to stun conventional analysts with its depth and duration.
But don’t listen to me – hear what markets have to say. I’ve already mentioned last week’s extraordinary spike in Treasury yields. Benchmark mortgage-backed securities yields surged 56 bps last week to 5.91%, the largest jump since 2020. Junk bond yields were up 96 bps in seven sessions to 8.58%, trading to the high since October 2023. Junk bond yield spreads to Treasuries widened 119 bps in four sessions. Leveraged loan prices traded to lows since July 2023. CDS prices had their biggest moves since the March 2020 crisis – investment-grade, high yield, and bank CDS prices.
At Wednesday’s close, muni (AAA) yields were up 89 bps in three sessions, before ending the week 66 bps higher. Importantly, such dramatic yield spikes are indicative of markets seizing up. Debt markets – including leveraged lending – were essentially shut down. Worse yet, acute debt market stress was a global phenomenon.
Last week, 10-year yields surged 57 bps in Colombia, 49 bps in Turkey, 48 bps in the Philippines and Mexico, and 46 bps in Indonesia. EM currency losses, especially versus the surging Japanese yen, meant speculator pain and “carry trade” deleveraging. A Bloomberg headline: “Emerging Stocks Sink Most Since 2008 as Tariff Turmoil Deepens.” Down 13%, stocks in Hong Kong suffered their worst session since 1997. Major stock index losses included Taiwan down 9.7%, Japan 7.8%, South Korea 5.6%, and China 7.0%.
I view the past couple weeks in the context of an expected arduous and protracted deleveraging period. Deleveraging last week went to the precipice – and recoiled after the 90-day tariff pause. This episode provided important thesis confirmation. Highly over-levered systems at home and abroad exposed their fragility. From experience, such market dynamics tend to be unpredictable. But I am confident that the leveraged speculating community and market systems more generally have suffered impairment. Leveraged speculation over years ballooned to become THE key marginal source of liquidity throughout global markets – and this key source of liquidity is now unsteady and weakening. Confidence has been shaken – confidence in policymaking, market structure, and in the future. While timing is always uncertain, mounting fragility raises the odds that the next phase of deleveraging turns highly destabilizing.
Last week, we also learned that the Treasury market and dollar face serious issues. In past crises, so-called U.S. “exorbitant privilege” provided critical system ballast. Now, important new market dynamics are afoot. In particular, the Treasury market now seemingly creates a key source of potential instability. Concerns – including Chinese selling and even a replay of a Liz Truss-style crisis of confidence – have the potential to destabilize the most important market in the world. Count me skeptical that Congress will rein in deficit spending. It will be difficult, if not impossible, to offset anticipated tax cuts with a combination of spending reductions and tariff revenues. I expect tariff receipts to come in much below the numbers bandied about by administration officials. I also fear that dynamics associated with deflating bubbles will see a problematic increase in countercyclical federal spending, coupled with weak receipts from personal income, corporate and capital gains taxes.
Prospects for inflation are both troubling and highly uncertain. Global market instability and deleveraging have put pressure on crude oil and some of the more industrial commodities. A seizing up of global markets has the potential to unleash the forces of economic depression and deflation. But beyond the shorter-run, inflation prospects are troubling. Globalization has been a powerful force for lower goods prices. I’m all for rebuilding our industrial base, but for many things, the U.S. would be a high-cost producer. And, at the minimum, the unfolding trade war with China will accelerate decoupling between the world’s great consumer and producer economies, a dynamic conducive to supply-chain problems and ongoing inflationary pressures.
As crisis dynamics gain momentum, I see no alternative for the Fed and global central bank community than to aggressively expand their balance sheets to accommodate speculative deleveraging and counteract acute systemic stresses. The administration’s new tariff regime will be an inflationary shock, though the intensity and duration are unclear. There is the clear possibility that the Fed is forced into another aggressive round of QE despite elevated inflation risk.
A future scenario that has for years occupied my thinking could now turn into reality. How might the Treasury market react in an environment of massive issuance, elevated inflation risk, and aggressive Federal Reserve “money printing”? I never contemplated that such a scenario would also include pursuit of the most extreme tariff regime, fraught relations with our allies, a potentially perilous trade war with China, and a trillion dollar plus highly levered “basis trade.”
For years, I’ve expounded my analytical framework and bubble thesis, warning of dire consequences. I appreciate that it has often seemed like stubbornly pessimistic analytical musings, especially with markets rising inexorably higher. Well, my overarching message is that bursting bubble risk is reality today. I purposely titled today’s call “Decades of Inflation Home to Roost”. Not “coming home” – it’s here now, knocking on the door, if you will. Reckless monetary inflation and loose financial conditions were never a solution. From my perspective, our goal is to look back at this period and feel that we did our best to prepare for unprecedented uncertainty and turmoil.
For the Week:
The S&P500 fell 1.5% (down 10.2% y-t-d), and the Dow dropped 2.7% (down 8.0%). The Utilities increased 1.6% (up 5.0%). The Banks gained 1.9% (down 13.2%), and the Broker/Dealers increased 1.2% (down 3.3%). The Transports were 0.2% higher (down 15.5%). The S&P 400 Midcaps increased 0.8% (down 12.1%), and the small cap Russell 2000 gained 1.1% (down 15.7%). The Nasdaq100 slumped 2.3% (down 13.1%). The Semiconductors dropped 4.0% (down 23.0%). The Biotechs were little changed (down 8.2%). With bullion rising another $89, the HUI gold index gained 2.4% (up 45.0%).
Three-month Treasury bill rates ended the week at 4.2075%. Two-year government yields dropped 16 bps to 3.80% (down 44bps y-t-d). Five-year T-note yields sank 22 bps to 3.94% (down 44bps). Ten-year Treasury yields fell 16 bps to 4.32% (down 24bps). Long bond yields dipped seven bps to 4.80% (up 2bps). Benchmark Fannie Mae MBS yields dropped 19 bps to 5.72% (up 12bps).
Italian 10-year yields dropped 17 bps to 3.65% (up 12bps y-t-d). Greek 10-year yields fell 16 bps to 3.37% (up 15bps). Spain’s 10-year yields declined 13 bps to 3.17% (up 11bps). German bund yields fell 10 bps to 2.47% (up 11bps). French yields declined 11 bps to 3.24% (up 5bps). The French to German 10-year bond spread narrowed one to 77 bps. U.K. 10-year gilt yields dropped 19 bps to 4.57% (unchanged). U.K.’s FTSE equities index recovered 3.9% (up 1.3% y-t-d).
Japan’s Nikkei 225 Equities Index rallied 3.4% (down 12.9% y-t-d). Japanese 10-year “JGB” yields declined three bps to 1.29% (up 44bps y-t-d). France’s CAC40 recovered 2.5% (down 1.3%). The German DAX equities index jumped 4.1% (up 6.5%). Spain’s IBEX 35 equities index surged 5.1% (up 11.4%). Italy’s FTSE MIB index rose 5.7% (up 5.2%). EM equities were mostly higher. Brazil’s Bovespa index increased 1.5% (up 7.8%), and Mexico’s Bolsa index rose 3.0% (up 7.1%). South Korea’s Kospi gained 2.1% (up 3.5%). India’s Sensex equities index rallied 4.5% (unchanged). China’s Shanghai Exchange Index increased 1.2% (down 2.2%). Turkey’s Borsa Istanbul National 100 index slipped 0.7% (down 5.2%).
Federal Reserve Credit increased $3.1 billion last week to $6.682 TN. Fed Credit was down $2.219 TN from the June 22, 2022, peak. Over the past 292 weeks, Fed Credit expanded $2.955 TN, or 79%. Fed Credit inflated $3.871 TN, or 138%, over the past 649 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dipped $1.6 billion last week to $3.293 TN. “Custody holdings” were down $77 billion y-o-y, or 2.3%.
Total money market fund assets sank $125 billion to $6.881 TN. Money funds were up $746 billion over 38 weeks (16.6% annualized) and $800 billion y-o-y (13.2%).
Total Commercial Paper gained $11.6 billion to $1.394 TN. CP has expanded $306 billion y-t-d and $82 billion, or 6.2%, y-o-y.
Freddie Mac 30-year fixed mortgage rates surged 21 bps this week to an eight-week high 6.83% (down 27bps y-o-y). Fifteen-year rates rose 21 bps to 6.03% (down 36bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 13 bps to 6.96% (down 51bps).
Currency Watch:
April 16 – Financial Times (William Sandlund and Chan Ho-him): “Donald Trump’s on-off tariffs have pushed currency volatility to multiyear highs and boosted demand for foreign exchange hedging products as companies struggle to adjust to market swings. Currency volatility has surged in recent days to levels last reached during the collapse of Silicon Valley Bank and Credit Suisse in March 2023… The uncertainty around Trump’s tariffs has created more demand for FX hedging products to offset sudden fluctuations in exchange rates that are hitting businesses with global operations, according to banks and executives at multinational companies.”
For the week, the U.S. Dollar Index declined 0.9% to 99.23 (down 8.5% y-t-d). For the week on the upside, the Mexican peso increased 3.1%, the New Zealand dollar 1.9%, the Norwegian krone 1.8%, the Swedish krona 1.7%, the South African rand 1.7%, the British pound 1.6%, the Australian dollar 1.4%, the Brazilian real 1.0%, the Japanese yen 1.0%, the Singapore dollar 0.6%, the euro 0.3%, and the Canadian dollar 0.2%. On the downside, the Swiss franc declined 0.2%, and the Swiss franc slipped 0.2%. The Chinese (onshore) renminbi declined 0.10% versus the dollar (unchanged y-t-d).
Commodities Watch:
April 14 – Bloomberg (Yihui Xie): “China saw an explosive surge in gold trading last week as the metal hit successive records and Sino-US trade tensions rose. The Shanghai Futures Exchange saw trading volumes of the precious metal hit the highest level in a year last week. That was thanks to investors and industry players — refineries, traders and retailers — that have ramped up hedging activities as global markets gyrate in response to trade policy changes in the US and China… The precious metal could reach $4,000 an ounce next year… amid a wave of purchasing by central banks and recession risks, according to Goldman Sachs…”
April 15 – Bloomberg (Liam Denning): “President Donald Trump may be teeing up the worst conditions for the oil business so far this century, outside of the 2020 pandemic shock… The International Energy Agency just slashed its forecast for oil demand growth this year by 29% from last month’s projection, to just 730,000 barrels a day. Its initial projections for 2026 continue the theme, with even lower growth of just 690,000 barrels per day. Both figures would represent a slowdown from 2024 and the 20-year average annual increase of almost 1 million barrels per day…”
The Bloomberg Commodities Index rose 1.4% (up 4.2% y-t-d). Spot Gold jumped 2.8% to $3,327 (up 27%). Silver increased 0.8% to $32.5551 (up 12.6%). WTI crude recovered $3.18, or 5.2%, to $64.68 (down 10%). Gasoline rallied 5.0% (up 4%), while Natural Gas sank 8.0% to $3.245 (down 10%). Copper jumped 5.9% (up 19%). Wheat declined 1.3% (down 1%), and Corn fell 1.6% (up 5%). Bitcoin rallied $1,100, or 1.3%, to $85,500 (down 10%).
Market Instability Watch:
April 17 – Bloomberg (Michael Mackenzie): “US financial assets are at risk of ‘mirroring dynamics of the UK and emerging markets’ as the Trump administration embraces protectionism, says Pacific Investment Management Co. ‘Rapid US policy changes pose challenges for investors accustomed to a global financial system anchored in U.S. markets and assets.,’ write Marc Seidner and Pramol Dhawan… The Treasury yield curve has steepened…, while the US dollar and Wall Street share prices have also weakened. That combination suggests investors are demanding a higher risk premium to own dollar-denominated assets. ‘With its protectionist policy pivots, the US is giving investors worldwide an occasion to rethink long-held assumptions,’ regarding the country’s investment outlook, and they said ‘the recent parallel slides of the US dollar, equities, and Treasuries marks ‘a combination more often associated with emerging market (EM) economies.’”
April 15 – Bloomberg (Vassilis Karamanis): “The traditional relationship between the dollar and Treasury yields is the weakest in three years as investors rethink the safety of US assets in times of stress. The dollar’s rapid decline has been caused by investors pulling out of US assets as the Trump administration’s trade war risks sending the economy into a recession. Meanwhile, yields on US long-term debt remain near 17-month highs… ‘The dislocation between the dollar, yields, and traditional risk proxies is striking, and increasingly reminiscent of past stress episodes,’ Danske Bank A/S analysts including Jens Naervig Pedersen wrote…”
April 13 – Politico (Eliza Gkritsi): “United States President Donald Trump’s trade policies are raising the chances that the next financial crisis will occur ‘sooner than expected,’ Germany’s incoming Chancellor Friedrich Merz warned. ‘The next financial crisis is sure to come. We just don’t know when and why,’ Merz told German newspaper Handelsblatt… ‘President Trump’s policies increase the risk that the next financial crisis will come sooner than expected,’ he said.”
April 14 – Bloomberg (Shuli Ren): “China is done retaliating against US President Donald Trump’s exorbitant tariffs, calling the administration’s actions a ‘joke’ that it no longer considers worthy of matching. The question now is whether President Xi Jinping will find a more potent weapon to strike back… One dangerous card that China’s got is its $760 billion holdings in Treasury securities. The country is the US’s second-largest foreign creditor after Japan… Treasury Secretary Scott Bessent brushed this fear aside. In a recent interview with Tucker Carlson, he talked about the beauty of being the world’s biggest borrower. ‘If you take a bank loan, the bank is in charge, they can repossess whatever you borrowed against. But if you take a big enough loan, you’re kind of in charge of the bank,’ he said.”
April 14 – Financial Times (Steven Kamin): “In the wake of President Trump’s initial salvo of broad-based tariffs, on 2 April, stock prices plunged, volatility as measured by the VIX index soared, and Treasury yields shot up substantially. Ordinarily, these developments would be expected to buoy the value of the dollar, which is a ‘flight-to-safety’ currency sought out by investors during times of crisis and acute uncertainty. Instead, the value of the dollar, too, plunged. In fact — relative to the predictions of a simple econometric model — the dollar fell by the greatest margin in the past four years.”
April 14 – Bloomberg (Craig Stirling): “US President Donald Trump’s trade war may have already inflicted persisting economic damage and could still lead to a financial crisis, according to Scope Ratings. That latter outcome was one of three scenarios outlined on Monday by the Berlin-based credit-assessment company in a report that warned of collateral fallout on other economies including America’s major trade partners. ‘The tariffs would represent the biggest peacetime trade shock to the global economy in more than 100 years,’ wrote analysts led by Alvise Lennkh-Yunus. ‘Even their full reversal, though unlikely, would not fully restore the confidence of previous alliances and supply chains, indicating a degree of durable economic loss.’”
April 12 – Financial Times (Sun Yu, Antoine Gara, Mary McDougall and Arash Massoudi): “Some of the world’s biggest pension funds are halting or reassessing their private market investments into the US, saying they will not resume until the country stabilises after Donald Trump’s erratic policy blitz. The moves underscore how big institutional investors are rethinking their exposure to the world’s largest economy as the US president’s trade policy upends markets… Some top Canadian funds are backing away from taking on more US private assets because of geopolitical concerns and fears they will lose tax breaks on their American investments… Meanwhile, one of Denmark’s biggest retirement funds has paused new investments in US private equity because of concerns over stability and Trump’s threats to take over Greenland…”
April 17 – Wall Street Journal (Telis Demos): “Once again, banks are struggling to expand their loan books. But they have an ace up their sleeve: lending to nonbank lenders. Across several large, global, national and regional banks that have reported earnings so far, a common pattern is tepid loan growth… Many are still shrinking their commercial real-estate loan books. One area that is growing rapidly is lending to nonbanks, often through banks’ trading units. These can be loans to hedge funds, but also to credit funds or financial companies that are themselves making loans to businesses or consumers.”
Trump Administration Watch:
April 14 – Wall Street Journal (Editorial Board): “The biggest issue in financial markets these days, other than tariffs, is the fate of U.S. dollar assets. Are President Trump’s herky-jerky decision-making and border taxes causing the world’s investors to shy away from the dollar and U.S. Treasurys? Mr. Trump pooh-poohed last week’s bond-market ructions that played a role in his 90-day pause on the worst of his tariffs. ‘The bond market’s going good. It had a little moment but I solved that problem very quickly,’ Mr. Trump told reporters… Well, maybe, or maybe not.”
April 13 – Financial Times (Aime Williams, Daniel Thomas, Stephen Foley and Michael Acton): “Donald Trump signalled that smartphones and other consumer electronics imported to the US from China would face tariffs, dealing a blow to hopes of a reprieve for Big Tech companies such as Apple, Nvidia and Microsoft. ‘NOBODY is getting ‘off the hook’ for the unfair Trade Balances, and Non Monetary Tariff Barriers, that other Countries have used against us, especially not China which, by far, treats us the worst!’ the US president wrote on his Truth Social platform. His administration on Friday excluded phones, chipmaking equipment and certain computers from steep ‘reciprocal’ tariffs in what was seen as a significant boost for technology groups… But on Sunday, US officials played down the exemptions… ‘What he’s doing is he’s saying they’re exempt from the reciprocal tariffs, said US commerce secretary Howard Lutnick… ‘But they’re included in the semiconductor tariffs, which are coming in probably a month or two.’
April 14 – Bloomberg (Annmarie Hordern and Daniel Flatley): “Treasury Secretary Scott Bessent played down the recent selloff in the bond market, rejecting speculation that foreign nations were dumping their holdings of US Treasuries, while flagging that his department has tools to address dislocation if needed… ‘We are a long way’ from needing to take action, he said. But ‘we have a big toolkit that we can roll out’ if so. Included in that toolkit is the department’s buyback program for older securities, Bessent said. ‘We could up the buybacks if we wanted.’”
April 15 – Axios (Felix Salmon): “The White House is happy to pick fights with most of its allies, from Canada to Germany, but on Monday it singled out two Latin American countries — El Salvador and Argentina — for praise and support. The meetings underscore the way in which the Trump administration likes to reward countries with right-wing leadership. In that sense, El Salvador and Argentina are the Latin American versions of Hungary and Slovakia in Europe. While El Salvadoran President Nayib Bukele, the self-described ‘world’s coolest dictator,’ was in the White House giving his full support to President Trump, Treasury Secretary Scott Bessent was down in Buenos Aires, greeting Argentine President Javier Milei with a big hug.”
April 16 – Bloomberg (Janet Lorin and David Westin): “Former Harvard University President Larry Summers assailed President Donald Trump over his deepening attacks on the school, slamming a ‘wildly extralegal’ federal funding freeze earlier this week and warning of government ‘tyranny.’ ‘This is not an isolated thing, what’s being done to Harvard,’ Summers said… ‘This is part of a broad and sweeping effort to suppress institutions that challenge the presidential administration’… While Summers said Harvard still needs to do more to combat prejudice against Jews and expand intellectual diversity, he applauded the institution’s effort to stand up to Trump. ‘Universities have made some very serious mistakes, and yes, they should be pressured and pressured with escalating strength to change that,’ said Summers… ‘But for the president of the United States to be calling for changing the tax status of his adversaries, this is new and I believe authoritarian and a real question about our democracy.’”
April 17 – CNBC (Natasha Turak): “U.S. President Donald Trump’s moves to take China to task on trade are likely to backfire as his sweeping global tariffs hit allies as well as rivals, according to former national security advisor John Bolton. ‘This is certainly not the way you treat your friends. You don’t slap them in the face publicly and say, I’m going to tariff you unless you do better on trade negotiations,’ Bolton told CNBC’s Dan Murphy… ‘And in fact, the one country that really deserves a trade war — China — we’ve put them in a much better position strategically by going to war on tariffs with our best friends, whereas if we had all joined together, maybe we would have had an impact on China’s behavior. So, this is a not just an economic blunder, which I think it clearly is. It’s a strategic blunder that’s going to cost the United States dearly if this tariff policy isn’t reversed.’”
April 14 – Bloomberg (Gregory Korte and Erik Wasson): “The Trump administration will ask lawmakers to cut more than $9 billion in funding for the Public Broadcasting Service, National Public Radio and foreign aid in the current fiscal year, an attempt to employ a little-used legislative tactic for reducing spending already approved by Congress… The proposal would end funding for the Corporation for Public Broadcasting, which funds PBS and NPR, entities which have long been targeted by conservatives for alleged liberal bias. Trump has derided the outlets as being unfavorable to him and a drain on taxpayer money.”
April 15 – Financial Times (Roula Khalaf and Joshua Franklin): “Donald Trump’s trade war risks eroding the US’s credibility, Jamie Dimon warned, as the JPMorgan… chief executive urged Washington to ‘engage’ with Beijing. Dimon said that the US remained ‘a haven’ because of its prosperity, rule of law, and economic and military strength… ‘A lot of this uncertainty is challenging that a little bit. So you’re going to be reading about this nonstop until hopefully these tariffs and trade wars settle down and go away so people can say, I can rely on America,’ Dimon said…”
April 18 – Telegraph (Michael Bow): “Donald Trump has lashed out at a British hedge fund that has placed a $100m bet against his social media company. Trump Media and Technology, the parent company of Mr Trump’s Truth Social platform, has accused UK-based Qube Research & Technologies of ‘potential market manipulation’ after the hedge fund shorted its shares on Wall Street.”
Constitution/Supreme Court Watch:
April 16 – Axios (Ivana Saric): “A federal judge said… he has found probable cause to hold the Trump administration in contempt for defying his order to halt deportation flights of alleged Venezuelan gang members to El Salvador. The Trump administration’s defiance of U.S. District Judge James Boasberg’s order last month has sparked a high-stakes legal battle that could test the limits of President Trump’s deportation powers… The Trump administration’s decision to proceed with the deportation flights displayed a ‘willful disregard’ for the order, Boasberg wrote in a ruling…”
April 16 – Associated Press (Collin Binkley): “On one side is Harvard, the nation’s oldest and wealthiest university, with a brand so powerful that its name is synonymous with prestige. On the other side is the Trump administration, determined to go further than any other White House to reshape American higher education. Both sides are digging in for a clash that could test the limits of the government’s power and the independence that has made U.S. universities a destination for scholars around the world. On Monday, Harvard became the first university to openly defy the Trump administration as it demands sweeping changes to limit activism on campus. The university frames the government’s demands as a threat not only to the Ivy League school but to the autonomy that the Supreme Court has long granted American universities. ‘The university will not surrender its independence or relinquish its constitutional rights,’ the university’s lawyers wrote… ‘Neither Harvard nor any other private university can allow itself to be taken over by the federal government.’”
April 17 – Axios (Avery Lotz): “Some legal scholars are warning that Trump administration’s reluctance — or outright refusal — to comply with court orders is setting the stage for a full-blown constitutional crisis. In several instances, federal judges have said that the Trump administration is not taking sufficient steps to adhere to rulings. Courts aren’t powerless. They can punish the executive branch in an effort to force compliance, experts say. The Supreme Court ruled that the Trump administration must facilitate the return of Kilmar Armando Abrego Garcia… ‘The argument that they’re in compliance with the Supreme Court’s order and the district court’s subsequent orders is ridiculous,’ said, David Noll, a law professor at Rutgers Law School. ‘They’re essentially thumbing their nose at the court,’ Noll said.”
April 15 – Financial Times (Edward Luce): “At around noon on April 14 2025, America ceased to have a law-abiding government. Some would argue that had already happened on January 20, when Donald Trump was inaugurated. On Monday, however, Trump chose to ignore a 9-0 Supreme Court ruling to repatriate an illegally deported man. He even claimed the judges ruled in his favour. The US president’s middle finger to the court was echoed by his attorney-general, secretary of state, vice-president and El Salvador’s vigilante president Nayib Bukele. The latter is playing host to what resembles an embryonic US gulag. In terms of clarifying moments, Trump’s meeting with Bukele compares with his dressing down of Ukraine’s Volodymyr Zelenskyy in late February.”
April 17 – Associated Press (Annie Ma, Fatima Hussein and Alia Wong): “The Trump administration has escalated its ongoing battle with Harvard, threatening to block the university from enrolling international students as the president called for withdrawing Harvard’s tax-exempt status. The moves raise the stakes of the showdown between the White House and the nation’s oldest, wealthiest and arguably most prestigious university, which on Monday became the first to openly defy the administration’s demands related to activism on campus, antisemitism and diversity.”
April 17 – Bloomberg (Janet Lorin): “Harvard University pushed back against the US government after President Donald Trump said the school should lose its tax-exempt status, warning that such a move would endanger its ability to carry out its mission and threaten higher education in America. ‘There is no legal basis to rescind Harvard’s tax-exempt status,’ university spokesman Jason Newton said…, adding that such a move would damage Harvard’s medical research efforts and ability to offer financial aid for students. He also cautioned that using this ‘instrument’ would have ‘grave consequences for the future of higher education in America.’”
April 18 – New York Times (Andrew Duehren, Alan Rappeport and Russ Buettner): “In the years after President Richard Nixon enlisted the Internal Revenue Service to investigate his political opponents, Congress passed a series of laws to make sure the agency would focus on collecting taxes and not use its vast powers to carry out political vendettas. But President Trump has moved swiftly to suppress that independence in the first few months of his second term and, tax experts and former agency officials warn, return the I.R.S. to darker days when it was used as a political tool of the president. His administration has decimated the ranks of I.R.S. civil servants and moved to install political allies in their place. This week, he publicly called for Harvard to lose its tax-exempt status… In the Oval Office on Thursday, Mr. Trump renewed that threat and suggested that several other universities the administration has accused of antisemitism could also lose their tax-exempt status.”
April 16 – Bloomberg (Malathi Nayak): “California Governor Gavin Newsom sued to halt Donald Trump’s tariffs, setting up a high-stakes legal challenge to the president’s landmark effort to overhaul global trade. The state is challenging Trump’s use of emergency powers to enact broad tariffs against Mexico, China and Canada. The governor cited harm to consumers and businesses, including those in agriculture and entertainment, in California…”
April 18 – Axios (Zachary Basu): “In his first 100 days, President Trump has declared more national emergencies — more creatively and more aggressively — than any president in modern American history. Powers originally crafted to give the president flexibility in rare moments of crisis now form the backbone of Trump’s agenda, enabling him to steamroll Congress and govern by unilateral decree through his first three months in office. So far, Trump has invoked national emergencies to impose the largest tariffs in a century, accelerate energy and mineral production, and militarize federal lands at the southern border. Paired with his assault on the judiciary, legal scholars fear Trump is exploiting loosely written statutes to try to upend the constitutional balance of power. The president can declare a national emergency at any time, for almost any reason, without needing to prove a specific threat or get approval from Congress.”
April 17 – Wall Street Journal (Joseph Pisani): “Protests were held across the country Thursday to oppose what students and professors say are the Trump administration’s threats to academic freedoms… Protesters said they were responding to recent funding cuts at universities, and the pressure from the Trump administration to arrest and silence pro-Palestinian protesters. Youngmin Seo, a lecturer at LaGuardia Community College…, said he came out to protest for his students and his two children. ‘Without free thinking and ideas,’ said the 63-year-old, ‘we don’t have a future.’”
China Trade War Watch:
April 16 – Reuters (Jeff Mason): “U.S. President Donald Trump is open to making a trade deal with China but Beijing should make the first move, White House press secretary Karoline Leavitt said… ‘The ball is in China’s court: China needs to make a deal with us, we don’t have to make a deal with them,’ Leavitt told a press briefing, saying Trump had given her that statement directly in an Oval Office meeting to use. ‘China wants what we have… the American consumer, or to put another way, they need our money,’ Leavitt said.”
April 16 – AFP: “China warned… it was ‘not afraid’ to fight a trade war with the United States and reiterated calls for dialogue, after US President Donald Trump said it was up to Beijing to come to the negotiating table. ‘If the US really wants to resolve the issue through dialogue and negotiation, it should stop exerting extreme pressure, stop threatening and blackmailing, and talk to China on the basis of equality, respect and mutual benefit,’ foreign ministry spokesman Lin Jian said.”
April 16 – Bloomberg: “China wants to see a number of steps from President Donald Trump’s administration before it will agree to trade talks, including showing more respect by reining in disparaging remarks by members of his cabinet, according to a person familiar with the Chinese government’s thinking. Other conditions include a more consistent US position and a willingness to address China’s concerns around American sanctions and Taiwan…”
April 14 – Financial Times (Peter Foster, Sam Fleming and Thomas Hale): “The US and China are locked in a dangerous trade stand-off… China relies on the US as an almost irreplaceable market for its manufactured goods, but experts warn that Washington should not underestimate Beijing’s capacity to resist Trump’s coercive tactics. The combination of centralised political control, increasingly diversified export markets and its virtual stranglehold on some strategically vital materials, including rare earth metals, gives Beijing plenty of negotiating power. The question is how far it can use its leverage without suffering even more damage itself.”
April 15 – Reuters (Clare Jim, Farah Master and James Pomfret): “One of China’s top officials overseeing Hong Kong affairs, Xia Baolong, said… the United States’ tariff war was ‘extremely shameless’ and aims to ‘take away Hong Kong’s life’. Xia, the director of China’s Hong Kong and Macau Affairs Office under the State Council, said bullying had never worked on Chinese people, including those from Hong Kong… ‘The Chinese people do not cause trouble, nor are they afraid of trouble. Pressure, threats and blackmail are not the right way to deal with China,’ Xia said in a televised speech…”
April 17 – Wall Street Journal (Liza Lin and Amrith Ramkumar): “New U.S. chip-export limits that rocked global markets on Wednesday are the clearest sign yet from the Trump White House that whatever advances China makes in AI will have to happen without America’s help. Trump administration officials have signaled for months that they were considering a crackdown on exports of processors from U.S. companies such as Nvidia…”
April 13 – Wall Street Journal (Yaroslav Trofimov): “America needs its allies and partners for what is shaping up as a protracted contest for geopolitical primacy now that President Trump has unleashed a trade war against China. They are in no rush to take sides. Some 70 countries currently negotiating tariff relief with the U.S. should ‘approach China as a group’ together with Washington, Treasury Secretary Scott Bessent said… Other U.S. officials suggested joint efforts to starve China of modern technologies and trade opportunities. The problem is, many European and Asian partners aren’t sure to what extent they are still allied with Washington.”
April 16 – Financial Times (Stephen Roach): “Trade wars are political wars. The purpose of Donald Trump’s astonishing 145% tariff on China is not a revival of the US economy of yesteryear but to bring Xi Jinping, his Chinese counterpart, to the table for the bluster of another Trumpian deal. That is not going to happen. Xi, despite his uncontested one-party elections, has a political equation of his own that will not allow him to bend. Xi’s political contract was sealed with a solemn pledge made to the Chinese people in November 2012, shortly after he was appointed General Secretary of the Chinese Communist party. On the steps of the National Museum of China, he espoused what has become known as the Chinese Dream: ‘Realising the great renewal of the Chinese nation is the greatest dream for the Chinese nation in modern history.’”
April 12 – Financial Times (Susannah Savage, Michael Pooler, Beatriz Langella, and Joe Leahy): “The US and China’s dizzying tariff tit-for-tat has spurred Brazil’s agricultural sector and pummelled American farmers, as Beijing looks to Latin America’s largest economy for a swath of goods from soyabeans to beef… ‘It is a boon for farmers in Brazil and Argentina, and it will help their industry a lot,’ said Ishan Bhanu, lead agriculture analyst at… Kpler. ‘The ramifications of this will be longer lasting than the actual measures — in Asia, countries will build better relationships with South America.’”
April 18 – Bloomberg (Joe Deaux, Ruth Liao and Weilun Soon): “The Trump administration took steps to impose levies on Chinese vessels docking at US ports, threatening to shake up global shipping routes and escalate the trade war between the world’s two biggest economies. Under a plan put forward…, all Chinese-built and -owned ships docking in the US would be subject to a fee based on the volume of goods carried, on a per-voyage basis… The plan also hits non-Chinese shipbuilders, adding a levy to any vehicle carriers not made in America calling at US ports.”
April 17 – Financial Times (Malcolm Moore): “China’s imports of US liquefied natural gas have completely stopped for more than 10 weeks… The freeze on US LNG is a repeat of a block on imports that lasted for more than a year during Donald Trump’s first term as president.”
April 16 – Bloomberg (Robert Tuttle and Yongchang Chin): “Chinese refiners are importing record amounts of Canadian crude after slashing purchases of US oil by roughly 90% amid escalating trade tensions. A pipeline expansion in Western Canada that opened less than a year ago has presented China and other East Asian oil importers with expanded access to the vast crude reserves in Alberta’s oilsands region. Chinese crude imports from the port at the pipeline terminus near Vancouver soared to an unprecedented 7.3 million barrels in March and are on pace to exceed that figure this month…”
April 15 – Bloomberg: “China has ordered its airlines not to take any further deliveries of Boeing Co. jets as part of the tit-for-tat trade war that’s seen US President Donald Trump levy tariffs of as high as 145% on Chinese goods…”
April 14 – Wall Street Journal (Liyan Qi and Erich Schwartzel): “Cao Lili, a Sichuan mother of three, once embraced products made around the world. Now she is shopping local. A few years ago, she traded her Honda for a Chinese electric vehicle made by Li Auto. She decided to turn in her iPhone for a model made by China’s Huawei in light of the escalating trade war. And she saw the Chinese animated movie ‘Ne Zha 2’ in theaters twice earlier this year, tickets that helped power the film to a record-setting gross of $2.1 billion. From smartphones to fast food, major American brands are rapidly losing market share in China to domestic rivals. Cao is part of a population increasingly embracing Chinese brands… that are eating away at American brands’ market dominance in the country. ‘It’s unnecessary to stick to foreign brands anymore,’ Cao said.”
April 16 – Bloomberg: “US investors could be forced to offload around $800 billion of Chinese equities ‘in an extreme scenario’ of financial decoupling between the world’s two largest economies, Goldman Sachs… estimates. US institutional investors currently own about $250 billion worth of Chinese companies’ American Depositary Receipts, or 26% of the total market value, Goldman analysts including Kinger Lau wrote… Their exposure to Hong Kong stocks amounts to $522 billion…”
Trade War Watch:
April 14 – Wall Street Journal (The Editorial Board): “Whatever else you might say about President Trump’s trade war, it’s ushering in new economic and diplomatic opportunities—for China. Witness Xi Jinping’s tour of Southeast Asia this week as the Chinese President presses an anti-tariff campaign to cement trade and other ties as an alternative to the U.S.”
April 17 – Bloomberg: “Chinese President Xi Jinping promoted the idea of an ‘Asian family’ and called for regional unity during a tour of Southeast Asia, in an apparent effort to counter US pressure on nations to limit trade ties with Beijing. Xi landed in Phnom Penh on Thursday, kicking off the final leg of his three-nation tour as the Trump administration prepares to seek trade partners’ cooperation in encircling Beijing.”
April 14 – Financial Times (A. Anantha Lakshmi, Edward White and Demetri Sevastopulo): “China’s President Xi Jinping has urged Vietnam to work with Beijing to oppose ‘unilateral bullying’, in a thinly veiled criticism of Donald Trump’s imposition of high tariffs on trading partners. Xi made the remarks in a meeting with Vietnam’s Communist party chief To Lam in Hanoi… Xi is visiting south-east Asia this week, his first foreign tour of the year, to reassure trade partners and strengthen ties with export-dependent countries rattled by Trump’s sweeping tariffs. ‘China’s mega market is always open to Vietnam,’ Xi said, adding that Beijing ‘will, as always, support Vietnam in taking a socialist path that suits its national conditions” and noting the countries’ ‘camaraderie plus brotherhood’.”
April 15 – Financial Times (Andy Bounds and Aime Williams): “The US has told the EU that some American trade tariffs would remain in place even after negotiations between the two sides, and has given little indication about how Brussels can reduce them, according to European officials. Two EU diplomats briefed on a meeting on Monday… said the American side made clear Washington would retain some level of tariffs… The EU diplomats said US negotiators stressed their desire to repatriate industry from overseas, which required tariffs to stay in place at some level. ‘The US is not ready to reduce tariffs on cars or steel but maybe had flexibility on the reciprocal tariffs but their baseline would be 10%. So what is there to be flexible on?’ said one of the diplomats. The second diplomat said chaos in the Trump administration made it hard to know what was genuine policy and what was a negotiating tactic.”
April 15 – Politico (Elena Giordano): “European Commission chief Ursula von der Leyen has noted ‘a positive side effect’ of the tariff uncertainty created by United States President Donald Trump: More world leaders want to do trade deals with the EU. ‘I am currently having countless talks with heads of state and government around the world who want to work together with us on the new order,’ von der Leyen said… ‘Everyone is asking for more trade with Europe — and it’s not just about economic ties. It is also about establishing common rules and it is about predictability,’ she said, adding: ‘Europe can deliver that.’”
April 14 – Reuters (Leika Kihara and Satoshi Sugiyama): “Japanese Prime Minister Shigeru Ishiba said… his country does not plan to make big concessions and won’t rush to reach a deal in upcoming tariff negotiations with U.S. President Donald Trump’s administration… ‘I’m not of the view that we should make big concessions for the sake of wrapping up negotiations quickly,’ Ishiba said in parliament… ‘In negotiating with the United States, we need to understand what’s behind Trump’s argument both in terms of the logic and the emotional elements behind his views,’ Ishiba said, noting that U.S. tariffs have the potential to disrupt the global economic order.”
April 16 – Associated Press (Darlene Superville, Mari Yamaguchi and Josh Boak): “President Donald Trump… inserted himself directly into trade talks with Japanese officials, a sign of the high stakes for the United States after its tariffs rattled the economy and caused the administration to assure the public that it would quickly reach deals. The Republican president said… he’ll attend the meeting alongside Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, top economic advisers with a central role in his trade and tariff policies. ‘Hopefully something can be worked out which is good (GREAT!) for Japan and the USA!’ Trump wrote…”
April 17 – New York Times (Alberto Nardelli): “The European Union is working on a proposal to introduce restrictions on some exports to the US as a possible retaliatory tactic in the expansive trade war President Donald Trump initiated last month. The restrictions would be used as a deterrent and only if negotiations with the US — which has put new tariffs on around €380 billion ($432bn) of EU goods — fail to produce a satisfactory outcome…”
April 15 – Bloomberg (Kate Sullivan and Ari Natter): “President Donald Trump has launched a probe into the need for tariffs on critical minerals, the latest action in an expanding trade war that has targeted key sectors of the global economy. The order… calls for the commerce secretary to initiate a Section 232 investigation under the Trade Expansion Act of 1962 to ‘evaluate the impact of imports of these materials on America’s security and resilience,’ according to a White House fact sheet.”
April 12 – Financial Times (Kenza Bryan and Demetri Sevastopulo): “Donald Trump’s administration is drafting an executive order to enable the stockpiling of metal found on the Pacific Ocean seabed, in an effort to counter China’s dominance of battery minerals and rare earth supply chains… The potato-sized nodules that are formed on the sea floor at high pressure over millions of years contain nickel, cobalt, copper and manganese used in batteries, electrical wiring or munitions, as well as traces of rare earth minerals. They could be added to existing federal stockpiles of crude oil and metals. The US is seeking to become self-sufficient in these critical minerals.”
April 12 – Bloomberg (Ayai Tomisawa): “Japan isn’t planning to use its US Treasury holdings as a negotiation tool to counter US tariffs in talks scheduled between the two governments for April 17. ‘As an ally, we would not intentionally take action against US government bonds, and causing market disruption is certainly not a good idea,’ Liberal Democratic Party policy chief Itsunori Onodera said…”
Budget Watch:
April 14 – Politico (Jordain Carney and Meredith Lee Hill): “They know it’s going to be big. They want it to be beautiful. Now congressional Republicans need to decide what’s going to be in it — and they’re confronting the very real possibility they might not be able to figure it out. A Thursday House vote might have finalized a fiscal framework for the GOP’s domestic policy megabill, but completing that intermediate step exposed huge fissures between the House and Senate over a range of issues crucial to finishing the sprawling legislation that’s expected to span tax cuts, border security, energy and more. Speaker Mike Johnson made big promises to a band of fiscal hawks about steep spending cuts, while Senate Majority Leader John Thune has left himself maximum flexibility to placate his own conference.”
New World Order Watch:
April 16 – CNBC (Holly Ellyatt): “The World Trade Organization warned… the outlook for global trade has ‘deteriorated sharply’ in the wake of U.S. President Donald Trump’s tariffs regime. ‘The outlook for global trade has deteriorated sharply due to a surge in tariffs and trade policy uncertainty,’ the WTO said in its latest ‘Global Trade Outlook and Statistics’ report… Based on the tariffs currently in place, and including a 90-day suspension of ‘reciprocal tariffs,’ the volume of world merchandise trade is now expected to decline by 0.2% in 2025, before posting a ‘modest’ recovery of 2.5% in 2026. The decline is anticipated to be particularly steep in North America, where exports are forecast to drop by 12.6% this year.”
April 16 – Reuters (Dhara Ranasinghe): “Fitch… cut its global growth forecasts…, projecting the weakest expansion since 2009 save for the COVID-19 pandemic as global trade tensions escalate… Fitch said it expects world growth to fall below 2% this year. The ratings agency said it had cut its world growth forecast for 2025 by 0.4 percentage points and China and U.S. growth estimates by 0.5 percentage points compared to its March figures.”
April 16 – Financial Times (Brooke Masters): “When Donald Trump won the US election in November, many bankers and money managers predicted that his presidency would create a bonanza for American finance. Now he could be Wall Street’s Achilles heel. For the past 15 years, the big US banks and money managers have been on the march. The banks recovered more quickly from the 2008 financial crisis than their European rivals and have been snapping up market share ever since. Goldman Sachs, JPMorgan, Morgan Stanley and Bank of America each captured at least 5% of last year’s global investment banking fees. The top European bank, Barclays, pulled in just 3.3%. US money managers, meanwhile, have been gathering assets at a record pace and squeezing fees. In some quarters, BlackRock has recorded more inflows than the entire European asset management industry combined.”
U.S./Russia/China/Europe/Iran Watch:
April 17 – Bloomberg (Henry Meyer): “Russian President Vladimir Putin met Iran’s top diplomat ahead of a second round of talks between the US and the Islamic Republic aimed at resolving the standoff over Tehran’s nuclear program. Putin received Iranian Foreign Minister Abbas Araghchi in Moscow…”
April 17 – Financial Times (Demetri Sevastopulo): “A Chinese satellite company linked to the country’s military is supplying Iran-backed Houthi rebels in Yemen with imagery to target US warships and international vessels in the Red Sea, according to American officials. The Trump administration has repeatedly warned Beijing that Chang Guang Satellite Technology Co Ltd, a commercial group with ties to the People’s Liberation Army, is providing the Houthis with the intelligence… ‘The United States has raised our concerns privately numerous times to the Chinese government on Chang Guang Satellite Technology Co Ltd’s role in supporting the Houthis in order to get Beijing to take action,’ said a senior state department official. The official added that China had ‘ignored’ the concerns. He also told the Financial Times that CGSTL’s actions and ‘Beijing’s tacit support’ despite Washington’s warnings were ‘yet another example of China’s empty claims to support peace’.”
Canada Friend and Ally Watch:
April 13 – Wall Street Journal (Nancy Keates): “Nathalie Mancuso, a Canadian elementary school teacher, had planned on keeping her Pompano Beach, Fla., vacation condo for a lot longer than six years… In March, Mancuso sold her two-bedroom, two-bathroom condo for $235,000… ‘The final decision was based on the political situation,’ Mancuso says. ‘We were scared of what might happen’… Many Canadians are giving up their U.S. vacation homes, selling properties they have owned for decades in popular snowbird spots like Florida and Arizona, according to local real-estate agents.”
Ukraine War Watch:
April 18 – Associated Press (Angela Charlton and Hanna Arhirova): “Secretary of State Marco Rubio said Friday that the U.S. may ‘move on’ from trying to secure a Russia-Ukraine peace deal if there is no progress in the coming days… He spoke in Paris after landmark talks among U.S., Ukrainian and European officials produced outlines for steps toward peace and appeared to make some long-awaited progress… ‘We are now reaching a point where we need to decide whether this is even possible or not,’ Rubio told reporters. ‘Because if it’s not, then I think we’re just going to move on. It’s not our war. We have other priorities to focus on.’”
April 18 – Axios (Barak Ravid): “The Trump administration’s informal end-of-April deadline for Russia to agree to a ceasefire in Ukraine is drawing near without any commitments from the Kremlin. U.S.-Russia talks have shown little clear progress and President Trump’s promise of a swift peace deal appears nowhere near fruition. Still, he insisted Thursday that a ceasefire was getting closer and that he’d be ‘hearing from Russia this week.’”
April 14 – Bloomberg (Aliaksandr Kudrytski and Hadriana Lowenkron): “President Donald Trump continued to blame Ukraine’s President Volodymyr Zelenskiy for the war in Ukraine amid questions about which side is responsible for the failure to achieve the ceasefire Trump has promised to deliver… ‘He’s always looking to purchase missiles,’ Trump said of Zelenskiy… ‘Listen, when you start a war, you know that you can win the war, right? You don’t start a war against somebody that’s 20 times your size and then hope that people give you some missiles.’”
April 17 – Politico (Veronika Melkozerova): “China is providing weapons to Russia, Ukrainian President Volodymyr Zelenskyy said, citing information from Ukraine’s intelligence and security services. Supplies include gunpowder and artillery, with Chinese enterprises working in Russia, he said… Officially, China has claimed to be neutral in Russia’s full-scale invasion of Ukraine, calling for a ‘peaceful and diplomatic resolution of the conflict.’ But in February 2022, shortly before the Kremlin launched its all-out assault, Moscow and Beijing announced a ‘no-limits partnership deal.’”
April 13 – Financial Times (Laura Pitel): “Germany is willing to send Taurus long-range missiles to Ukraine, the country’s chancellor-in-waiting has said, as he stressed the need to put Kyiv on the front foot and force concessions from Russian President Vladimir Putin. Friedrich Merz, who is set to take office as the leader of Europe’s largest nation next month, denounced a Russian attack on the Ukrainian city of Sumy on Sunday as ‘a serious war crime’ and said that Kyiv needed help to ‘get ahead’ in the conflict. Asked if he would follow through on a previous call for Germany to supply Ukraine with the Taurus missiles that Kyiv has long asked for, he said that he would be willing to do so if done in co-ordination with European allies.”
April 14 – Wall Street Journal (The Editorial Board): “President Trump offered his proposal for a 30-day cease-fire between Ukraine and Russia in early March, and Ukraine quickly accepted. Vladimir Putin’s latest nyet came Sunday in the form of another missile strike against civilians in the Ukrainian city of Sumy. The ballistic missile attack killed 34, including two children, and injured more than 100 as it struck university and residential buildings… Targeting civilians is a war crime, but that is nothing new for the Kremlin. The Sumy attack followed one last month that struck a playground in the city of Kryvyi Rih, killing 20. The dead included nine children.”
Middle East Watch:
April 15 – Wall Street Journal (Michael R. Gordon, Laurence Norman and Benoit Faucon): “U.S. special envoy Steve Witkoff appeared to backtrack on comments that Iran could be allowed to enrich uranium at a low level in a new nuclear deal with the Trump administration, saying… Tehran would have to abandon its enrichment program. ‘A deal with Iran will only be completed if it is a Trump deal,’ Witkoff wrote in a post on X, adding that ‘Iran must stop and eliminate its nuclear enrichment and weaponization program.’ Witkoff’s statement ran counter to the position he outlined a day earlier when he indicated that limited enrichment could be allowed if it was subject to stringent verification and other steps were taken to prevent Tehran from being able to make a nuclear weapon.”
Global Credit and Financial Bubble Watch:
April 14 – Bloomberg (Carmen Arroyo and Scott Carpenter): “The biggest buyers of leveraged loans are getting pushed to the sidelines, which is set to make it harder for riskier companies to tap the $1.4 trillion market for such debt. Money managers are poised to dramatically slow new issuance of collateralized loan obligations, which buy and pool buyout debt, in the coming weeks, according to Goldman Sachs… and Morgan Stanley analysts… Investors are reducing their exposure to risky corporate debt in light of tariffs, with US leveraged loan funds recently recording their biggest-ever weekly outflow of $6.5 billion. Without new CLOs, banks will find it even more difficult to offload the buyout debt.”
April 14 – Bloomberg (Bogdan Carp, Kyle Ashworth and Moeka Nakamura): “Deteriorating corporate loans may be an early warning for potential losses in the lowest-rated tranches of broadly-syndicated collateralized loan obligations. About $24 billion worth of CLOs across 104 deals saw their junior overcollateralization tests fail and assets exceed the 7.5% threshold of CCC ratings as a share of total collateral value. This has a critical impact on liquidity and valuation, especially for investors in lower-rated tranches where interest may be deferred and risk of principal loss may grow.”
April 15 – Bloomberg (Caleb Mutua): “Bond dealers started demanding higher compensation for the risk of trading investment-grade corporate debt after President Donald Trump’s trade war sent volatility racing through markets, according to… Apollo Global Management Inc. Bid-ask spreads — or the difference between the price at which dealers are willing to buy and sell the same bond — roughly doubled to 0.2 percentage points for less liquid securities after Trump released his punitive tariffs on April 2, Apollo’s chief economist, Torsten Slok, wrote… That pushed the cost of trading so-called off-the-run bonds, or deals of less than $900 million issued more than two years ago, to levels not seen since the 2020 pandemic… ‘Liquidity in on-the-run bonds has improved, but off-the-run paper has become virtually untradeable and effectively a buy-and-hold investment,’ Slok wrote.”
April 15 – Bloomberg (Gowri Gurumurthy): “The US junk-bond market has reopened with its first offering in nearly two weeks as credit markets stabilize following tariff-induced volatility. Venture Global Plaquemines Lng, a developer of a liquefied natural gas export facility in the US, sold $2.5 billion dollar-denominated senior secured notes… The total bond sale was upsized to $2.5 billion, from an original size of $1.5 billion.”
April 12 – Financial Times (Joshua Franklin and Gregory Meyer): “US consumers are showing increasing signs of financial stress as they brace for higher prices from the Trump’s administration’s tariffs on imports, raising concerns about a crucial driver of the US economy. In first-quarter earnings, JPMorgan said the portion of loans in its credit card business deemed unrecoverable rose to a 13-year high. Industry-wide, the rate of charge-offs is now higher than the level before the Covid-19 outbreak, reversing a period of stellar credit card payments during the pandemic when consumers benefited from government stimulus programmes.”
April 17 – Bloomberg (Ethan M Steinberg): “Moody’s… is boosting its forecast for defaults this year as escalating trade wars globally are increasingly likely to weigh on economic growth and make financing harder to get. The credit-grading firm said it now sees the default rate for speculative-grade companies reaching 3.1% by the end of the year, compared with its prior expectation of 2.5%… Credit strategists across the globe have ripped up their 2025 outlooks and now see risk premiums widening and growth subsiding.”
April 16 – Bloomberg (Josyana Joshua and Ethan M Steinberg): “Companies are expected to sell nearly another $1 trillion of high-grade bonds in the US this year, and timing those sales is harder than it’s been in years, as tariff policy changes spur market turmoil. This year, there have been 22 days with no investment-grade bond sales, one of the highest of the last decade, worse even than during the early part of the Covid-19 pandemic… The figure is second only to the regional banking crisis and failure of Credit Suisse in 2023. That’s resulted in big swings in the amount of debt sold daily… That tumult leaves companies with fewer chances to sell Debt…”
April 14 – Wall Street Journal (Matt Wirz): “More companies filed for bankruptcy-court protection in the first three months of this year than in any first quarter since 2010, according to data from S&P Global Market Intelligence. About 190 U.S. companies filed for bankruptcy protection in January through March.”
April 15 – Bloomberg (Mia Glass and Masahiro Hidaka): “The premium that investors demand to hold Japan’s 30-year government bonds over five-year notes has widened to the most in more than two decades as global volatility and fiscal concerns drive up super-long yields.”
Bubble and Mania Watch:
April 17 – Bloomberg (Denitsa Tsekova and Vildana Hajric): “With Jerome Powell ruling out a rescue mission this week and incurring the wrath of Donald Trump, Wall Street is desperate for a lifeline as tariff-lashed markets slide anew. How desperate? Just look at the all-out plunge this year in returns that has taken hold across investment strategies that ride everything from US stocks big and small to cryptocurrencies and corporate debt. In the grip of the tariff fallout, 90 of the top 100 best-performing exchange-traded funds of last year are down in 2025, with an average loss of 13%…”
April 17 – Bloomberg (Laura Benitez): “Private equity investors will have to wait even longer before getting back their money back from older funds as global trade turmoil dims hopes of a deal revival, according to the head of Ares Management Corp.’s buyout business… ‘Investors came into this year with a lot of hope that there would be a revival in M&A and distributions from managers would start flowing,’ Matt Cwiertnia, head of private equity at Ares, said… ‘Many are starting to understand that they might still have quite a wait ahead.’”
April 14 – Reuters (Jaiveer Singh Shekhawat and Nupur Anand): “JPMorgan… CEO Jamie Dimon has sold about $31.5 million worth of the bank’s shares, according to a regulatory filing. Dimon had also offloaded some shares last year in his first such sale since taking over the top role in 2005.”
April 14 – Bloomberg (Paulina Cachero): “In New York, real estate is increasingly something you inherit — not buy. The share of Manhattan home sales involving a trust — a preferred tool for passing on wealth — surged to 28% last year in a sharp rise from 17% three years ago, data from real estate analytics firm Attom show. Behind the trend is a combination of factors — including sky-high prices, shifting tax and transparency laws, and the first waves of a $100 trillion wealth transfer.”
AI Bubble Watch:
April 16 – CNBC (Kif Leswing and Jordan Novet): “Nvidia said… it will take a quarterly charge of about $5.5 billion tied to exporting H20 graphics processing units to China and other destinations… On April 9, the U.S. government told Nvidia it would require a license to export the chips to China and a handful of other countries, the company said in a filing. The disclosure is the strongest sign so far that Nvidia’s historic growth could be slowed by increased export restrictions on its chips…”
April 17 – Financial Times (Christian Davies, Kathrin Hille, Michael Acton and George Hammond): “Donald Trump’s global tariff regime is endangering his ambitions of encouraging domestic chip production while hampering US goals of dominating the race to develop world-beating artificial intelligence. Industry insiders, including tech executives, supply chain experts and analysts, said the US president’s escalating trade war is likely to hinder the expansion of American computing power. This is because the measures may drive up costs for building semiconductor fabrication plants and AI data centres in the US.”
April 16 – Financial Times (Siddharth Venkataramakrishnan): “Much ink has been spilt and many keys pressed to figure out whether AI is a bubble. Just last month, OpenAI’s ersatz Ghibli took X by storm. A ‘big net win for society’, as head honcho Sam Altman described it, and for the ‘democratisation of creating content’ which Hayao Miyazaki and other dastardly animators spent so long gatekeeping. One hint that we might just be stuck in a hype cycle is the proliferation of what you might call ‘second-order slop’ or ‘slopaganda’: a tidal wave of newsletters and X threads expressing awe at every press release and product announcement to hoover up some of that sweet, sweet advertising cash. That AI companies are actively patronising and fanning a cottage economy of self-described educators and influencers to bring in new customers suggests the emperor has no clothes (and six fingers).”
April 16 – Axios (Linh Ta and Alissa Widman Neese): “The AI boom is reshaping the Midwest, driving a wave of data center development, straining energy systems, consuming millions of gallons of water… Data centers power the AI boom — but their soaring energy and water demands often go unreported, with unclear benefits for local communities and few permanent jobs created. Data centers used 4.4% of U.S. electricity in 2023 and could consume up to 12% by 2028… Data center construction is at an all-time high, increasing 69% year over year from 2023 to 2024, per CBRE… The Midwest is emerging as one of the nation’s fastest-growing data center hubs, with development stretching from Kansas and Iowa to Great Lakes states like Ohio, Michigan, Indiana and Wisconsin.”
April 15 – Bloomberg (Brody Ford): “Microsoft Corp.’s decision to pause work on data centers in Ohio surprised local officials because the company had agreed to develop the sites as recently as two months before — suggesting a sudden pivot. In January, the city of Heath, Ohio, inked agreements to improve infrastructure such as roads and water lines for Microsoft’s planned data center in the city…”
April 16 – Wall Street Journal (Mauro Orru): “ASML reported weaker-than-expected orders for its chip-making machines in the first quarter and warned that President Trump’s tariff policies were creating uncertainty for the industry. The Dutch company said that while it still expects to grow this year and next, ‘recent tariff announcements have increased uncertainty’ and that ‘the situation will remain dynamic for a while’… ASML makes the machines that produce the world’s most advanced computer chips, which are used to power artificial-intelligence systems.”
Inflation Watch:
April 15 – Bloomberg (Sara Sjolin and Christian Wienberg): “Container ships, the workhorses of global trade transporting almost 90% of the world’s manufactured goods, have become a target in Donald Trump’s conflict with China — and none of the major carriers stand to escape the extra costs. Trump wants to punish operators of Chinese ships in order to help stimulate the creation of a US shipbuilding industry. Among the proposals is a fee of at least $1 million each time a Chinese-operated or Chinese-built ship enters a US port.”
April 15 – Bloomberg (Millie Munshi and Maya Averbuch): “The US will begin imposing tariffs of more than 20% on most imports of tomatoes from Mexico, citing ‘unfairly priced’ shipments from the country.”
Federal Reserve Watch:
April 16 – Financial Times (Claire Jones): “Donald Trump’s tariffs are ‘likely’ to put at risk the Federal Reserve’s goals of keeping prices and unemployment in check, chair Jay Powell warned, as he emphasised the US central bank’s focus on inflation. The Fed chief said… ‘The [Trump] administration is implementing significant policy changes and particularly trade is now the focus. The effects of that are likely to move us away from our goals.’ While US rate-setters would aim to ‘balance’ their goals of keeping inflation near 2% and maximising employment, they would need to remember that ‘without price stability, we cannot achieve long periods of strong labour market conditions’, Powell said… Powell also said the president’s tariffs announced so far had been ‘significantly larger than anticipated’, adding that ‘the same was likely to be true of the economic effects, which will include higher inflation and slower growth’.”
April 16 – Bloomberg (Jonathan Levin): “Federal Reserve Chair Jerome Powell is pushing back against President Donald Trump after deftly avoiding confrontation for months. In a question and answer session…, Powell portrayed chaotically implemented tariffs as plainly bad for the economy; slammed the approach taken by the Department of Government Efficiency; and issued a legal defense for why he thinks he can withstand any attempt by Trump to fire him. At a time of rising concern about Fed independence, he did us all a favor by showing he’s laser-focused on the central bank’s core goals and will fight to be able to keep it that way.”
April 17 – Bloomberg (Maria Eloisa Capurro and Reade Pickert): “Federal Reserve Bank of New York President John Williams said he doesn’t see a need to adjust interest rates ‘any time soon,’ adding the Fed must ensure tariffs don’t lead to persistently high inflation. Williams said the economy is in a ‘very good place,’ and the Fed can wait for more information… ‘We need to make sure that any one-time changes in prices don’t pass through into more persistent, higher inflation,’ Williams said…”
April 14 – Reuters (Howard Schneider): “The Trump administration’s tariff policies are a major shock to the U.S. economy that could lead the Federal Reserve to cut interest rates to head off recession even if inflation remains high, or alternately leave little lasting imprint if they turn out to be a negotiating tool, Fed Governor Christopher Waller said… If the full suite of tariffs planned by President Donald Trump remains in effect, the impact on inflation may still be temporary, Waller said, but the ‘effects on output and employment could be longer-lasting… If the slowdown is significant and even threatens a recession, then I would expect to favor cutting the…policy rate sooner, and to a greater extent than I had previously thought.’”
April 13 – Bloomberg (Tony Czuczka): “Federal Reserve Bank of Minneapolis President Neel Kashkari signaled confidence that markets will remain orderly as investors sort through President Donald Trump’s shifting trade policies and said the central bank must stay focused on keeping inflation expectations anchored… ‘At the Fed, our job is to keep inflation under control so that rate isn’t even higher,’ he said… ‘I think investors in the US and around the world are trying to determine what is the new normal in America’ and the Fed has ‘zero ability to affect that destination,’ Kashkari told CBS. ‘All we can do is keep inflation expectations anchored and manage some of the ups and downs on that journey,’ he said.”
April 15 – Axios (Courtenay Brown): “President Trump is taking one of the pandemic’s most harmful, unintended economic consequences — supply chain chaos — and morphing it into official U.S. policy… ‘There’s a fundamental fear that we might be on the edge of going back to conditions like 2021 or 2022 — where inflation is raging out of control and costs are on everyone’s mind,’ Chicago Fed president Austan Goolsbee told the Economic Club of New York… Manufacturers tell Goolsbee that ‘‘maybe this is going to take us back to the 2020 kind of experience with supply disruptions, and we can’t get components,’’ he added.”
U.S. Economic Bubble Watch:
April 15 – Bloomberg (Augusta Saraiva): “The US economy is set to lose billions of dollars in revenue in 2025 from a pullback in foreign tourism and boycotts of American products, adding to a growing list of headwinds keeping recession risk elevated. Arrivals of non-citizens to the US by plane dropped almost 10% in March from a year earlier… Goldman Sachs… estimates in a worst-case scenario, the hit this year from reduced travel and boycotts could total 0.3% of gross domestic product, which would amount to almost $90 billion.”
April 17 – Associated Press (Matt Ott): “U.S. applications for jobless benefits fell again last week as the labor market continues to hold up despite fears of a tariff-induced recession. Jobless claim applications fell by 9,000 to 215,000 for the week ending April 12… That’s well below the 225,000… forecast… The total number of Americans receiving unemployment benefits for the week of April 5 jumped by 41,000 to 1.89 million.”
April 16 – CNBC (Diana Olick): “Mortgage rates jumped to the highest level since February last week… Applications for a mortgage to purchase a home dropped 5% for the week and were 13% higher than the same week one year ago. Demand from buyers may be higher than a year ago, but there is 30% more active inventory on the market than there was last year at this time, according to Realtor.com.”
April 17 – Associated Press (Axex Veiga): “The average rate on a 30-year mortgage in the U.S. climbed to its highest level in eight weeks, a setback for home shoppers in the midst of the spring homebuying season. The rate rose to 6.83% from 6.62% last week… A year ago, the rate averaged 7.1%.”
April 16 – Bloomberg (Michael Sasso): “US homebuilder confidence barely rose this month on a pickup in current sales, though demand expectations stumbled to a more than one-year low and prices of construction materials are climbing on the heels of higher tariffs. A gauge of overall conditions from the National Association of Home Builders and Wells Fargo rose 1 point to 40 in April, hovering near some of the lowest levels since late 2023… Builder expectations for sales in the next six months slipped 4 points to 43, reaching its lowest level since November 2023.”
April 17 – Reuters (Lucia Mutikani): “U.S. single-family homebuilding plunged to an eight-month low in March… Single-family housing starts… dropped 14.2% to a seasonally adjusted annual rate of 940,000 units last month, the lowest level since July… The NAHB said the impact of import duties was already being felt with ‘the majority of builders reporting cost increases on building materials due to tariffs.’ It said suppliers have on average raised their prices by 6.3%, meaning that builders estimated a typical cost effect from recent tariff actions at $10,900 per home… Overall housing starts tumbled 11.4% to a rate of 1.324 million units.”
April 16 – CNBC (Jeff Cox): “Consumer spending was stronger than expected in March as demand remained high despite declining sentiment… The advanced estimate of retail sales showed an increase of 1.4% on the month, better than the 1.2%… estimate and higher than the 0.2% increase in February. The year-over-year rise was 4.6%…, while the monthly increase was the biggest since January 2023. Excluding autos, the numbers also were stronger than expected, with sales up 0.5% compared with the 0.3% forecast… Motor vehicle and parts dealers reported a surge of 5.3% in sales.”
China Watch:
April 13 – Bloomberg: “China’s credit expanded more than expected in March as the government accelerated bond offerings to help the economy offset the impact of surging US tariffs. Aggregate financing, a broad measure of credit, rose 5.89 trillion yuan ($808bn)…, an increase of almost 22% from the same month a year ago. The median of forecasts… was 4.96 trillion yuan… Financial institutions offered 3.64 trillion yuan of new loans in March…, exceeding the median forecast of 3 trillion yuan… Net sovereign and local bond financing reached nearly 1.5 trillion yuan last month, the highest for any March since at least 2017… The bond deluge came after China vowed to front-load fiscal spending earlier this year on anticipation of looming trade tensions with the US.”
April 18 – Bloomberg (Foster Wong): “Chinese Premier Li Qiang urged government officials to strengthen their efforts to stabilize the stock market and nurture the real estate market to help shield the economy from heightened trade tensions with the US. Li also called for strengthening the country’s counter-cyclical measures in the face of a complex and challenging external environment…”
April 13 – Reuters (Xiuhao Chen, Ethan Wang, Tina Qiao and Ryan Woo): “China’s exports rose sharply in March after factories rushed out shipments before the latest U.S. tariffs took effect… Exports rose 12.4% year-on-year, a five-month high, handily beating 4.4% growth expected in a Reuters poll of economists. Exports grew 2.3% in January-February… Inbound shipments fell 4.3%, compared with a 2.0% decrease forecast in a Reuters poll, and an unexpectedly steep contraction of 8.4% at the start of the year.”
April 18 – Bloomberg (Shi Bu and Kevin Yao): “China’s fiscal revenue decline slowed in the first three months this year… Fiscal revenue in the January-March period totalled 6.0 trillion yuan ($821.54bn), down 1.1% year-on-year… China’s tax revenue fell 3.5% in the first quarter from the previous year, while non-tax revenue surged 8.8%… Fiscal expenditure rose 4.2% on year in the January to March period. China has set a budget deficit target to around 4% of GDP this year, its highest on record, to help hit its growth target of around 5%…”
April 15 – Bloomberg: “China’s home price decline eased again in March on the back of support policies… New-home prices in 70 cities… dropped 0.08% from February, when they declined 0.14%… Values of second-hand homes fell 0.23%, the smallest decline in almost two years… From a year earlier, new-home prices fell 4.99%, narrowing from February’s 5.22% drop, the statistics bureau said. Existing-home prices dropped 7.25%, compared with a 7.53% fall a month earlier.”
April 14 – Bloomberg: “Zhongrong International Trust Co., one of China’s largest shadow banks before it defaulted on billions of dollars of wealth products, is facing liquidation after its two state-appointed custodians concluded the firm is insolvent, according to people familiar with the matter. A winding-up proposal for Zhongrong, which had 786 billion yuan ($108bn) of assets under management as of 2022, was recently submitted to regulators…”
Central Bank Watch:
April 17 – Associated Press (David McHugh): “The European Central Bank cut interest rates… for the seventh time to counter worries about economic growth fueled by President Donald Trump’s tariff onslaught… The bank’s rate-setting council decided… to lower its benchmark rate by a quarter percentage point to 2.25%. The bank has been steadily cutting rates after raising them sharply to combat an outbreak of inflation from 2022 to 2023.”
Europe Watch:
April 15 – Financial Times (Leila Abboud): “France must break its decades-long habit of spending beyond its means, including by working more and improving the efficiency of public services, said Prime Minister François Bayrou. ‘It’s a vicious circle, a dangerous trap, potentially irreversible, that must be identified and whose full implications we must share with the French people,’ Bayrou said of France’s chronic deficits… ‘This risk is politically untenable. But more profoundly, it is morally unacceptable.’”
Japan Watch:
April 17 – Reuters (Leika Kihara): “Bank of Japan Governor Kazuo Ueda said… the central bank will keep raising interest rates if underlying inflation accelerates toward its 2% target, as it projects. But Ueda told parliament the BOJ will scrutinise ‘without pre-conception’ whether the economy will move in line with its forecasts given uncertainty over the impact of U.S. tariffs.”
April 18 – Reuters (Leika Kihara): “Japan’s core inflation accelerated in March due to persistent rises in food costs…, complicating the central bank’s task of weighing mounting price pressures against risks to the economy from higher U.S. tariffs… The core consumer price index (CPI)… rose 3.2% in March from a year earlier…, matching a median market forecast and accelerating from a 3% gain in February.”
April 13 – Bloomberg (Leika Kihara): “Bank of Japan Governor Kazuo Ueda said… global and domestic economic uncertainty has increased sharply due to U.S. tariff policy. ‘U.S. tariffs will likely put downward pressure on global and Japanese economies through various channels,’ Ueda told parliament. ‘The BOJ will guide monetary policy appropriately from the standpoint of sustainably achieving its 2% inflation target, while scrutinising economic, price and financial developments without any pre-conception,’ Ueda said.”
Leveraged Speculation Watch:
April 16 – Bloomberg (Gillian Tan, Hema Parmar, and Katherine Burton): “Whale Rock Capital Management racked up double-digit losses in the first quarter as President Donald Trump’s trade wars rattled markets. The public equities hedge fund lost 15% in March, extending its loss over the first three months of the year to about 20%… Whale Rock managed about $8 billion at the end of February.”
Social, Political, Environmental, Cybersecurity Instability Watch:
April 15 – Wall Street Journal (Steve Goreham): “In the Trump administration’s first 100 days, advocates for climate policy have been hit by actions to close climate departments, halt offshore wind leases, cut green energy funding, and impose tariffs on renewable equipment imports from China. Just when it seemed things couldn’t get worse, President Trump ordered the federal government to challenge state climate laws. Last week Mr. Trump issued an executive order titled ‘Protecting American Energy from State Overreach.’ The order says state laws ‘seek to regulate energy beyond their constitutional or statutory authorities.’ It mentions laws in California, New York and Vermont and uses the term ‘extortion law.’ The order directs U.S. Attorney General Pam Bondi to ‘identify all state and local laws… burdening the identification, development, siting, production, or use of domestic energy resources that are or may be unconstitutional, preempted by federal law, or otherwise unenforceable’ within 60 days.”
April 17 – Bloomberg (Jennifer A Dlouhy and Akshat Rathi): “White House officials are preparing executive orders that would strip some environmental nonprofits of their tax-exempt status, setting up a possible Earth Day strike against organizations seen as standing in the way of President Donald Trump’s push for more domestic oil, gas and coal production. The effort… comes alongside other administration moves to use the US tax code or government funding to single out groups that oppose the president’s agenda.”
April 17 – Bloomberg (Lauren Rosenthal and Brian K Sullivan): “Weather analysis tools used by a wide array of businesses and government entities across the US have gone dark after funding for long-running regional climate hubs lapsed. The websites for four US National Oceanic and Atmospheric Administration regional centers serving 27 states across the central and southern US — including Texas, Florida, Ohio, the Dakotas and the Carolinas — are no longer accessible…”
