Thanks again Troy. Always good to read your assesment. Let's see if the crash will last past WEDN. Issue is I don' t see much catalyst for a short term rebound unless there is bilateral deals announcements that will show an off ramp possibility for trump administration on those tariffs. Also I wonder why USD falls more relative to EU, won't EU be more impacted than US in this situation and thus risk of recession/stagflation heightned in EU? Thanks as usual.
Long term, EU will be impacted more than the U.S. because the EU is a net exporter.
With regards to currencies, I'm not entirely sure, but this is an argument I've seen presented by others:
EU/China/Japan rack up trade surpluses with the U.S., hence receive dollars. They invest those dollars into U.S. assets. With the Trump administration launching a trade war with basically every major trading partner (Canada, EU, China), those trading partners are selling U.S. dollar denominated-assets and bringing their wealth back home. Hence the selling pressure on the dollar.
But you can see that it's not a clear "short Dollar" environment. The dollar rallied on Friday in a classic safe-haven play (see the Dollar during the 2008 crash).
Take this with a grain of salt because I don't trade currencies. IMO currencies is one of the hardest markets to trade - in many cases, it's better to trade bonds than currencies.
Yardeni writes: "Conspiracy theories are usually wrong even though they seem to explain a lot. The latest conspiracy theory floating on social media is that President Donald Trump is causing a recession to bring interest rates down to reduce the federal government's net interest outlays and to lower mortgage rates to make homes more affordable. A recession would also weaken the foreign exchange value of the dollar, which would boost exports and depress imports. Trump's tariffs should force manufacturers to move to the US and reduce foreign demand for American farm products, which would lower food prices in the US. What about the stock market crash? Not that many Americans own stocks, according to this conspiracy theory".
Maybe there is truth to this? Otherwise not sure I understand his tariffs rational and rhetoric. But what are they missing ? Isn't comparative advantage a key rule for economic prosperities globally and tariffs go against this evidence? cheers
Yea I saw that on X. In my opinion, it makes no sense.
If Trump is purposely causing a recession to bring down interest rates, what follows?
The U.S. government will need to borrow more trillions $ for fiscal stimulus, just as they did in 2008 and COVID. That would simply balloon the debt even more!
right...I would agree, so it still might be a negotiation tactic but jeez this is taking his real estate playbook to real life politics/economics, dangerous stuff... We really need a quick success with couple of countries (ie agreement on tariffs), showcase a way to get off ramp those tariffs so Wall st can breath...otherwise we're in for tough weeks ahead with no end in sight...
brilliant stuff, i really hope this stays free but either way keep up the good work
Thanks again Troy. Always good to read your assesment. Let's see if the crash will last past WEDN. Issue is I don' t see much catalyst for a short term rebound unless there is bilateral deals announcements that will show an off ramp possibility for trump administration on those tariffs. Also I wonder why USD falls more relative to EU, won't EU be more impacted than US in this situation and thus risk of recession/stagflation heightned in EU? Thanks as usual.
Long term, EU will be impacted more than the U.S. because the EU is a net exporter.
With regards to currencies, I'm not entirely sure, but this is an argument I've seen presented by others:
EU/China/Japan rack up trade surpluses with the U.S., hence receive dollars. They invest those dollars into U.S. assets. With the Trump administration launching a trade war with basically every major trading partner (Canada, EU, China), those trading partners are selling U.S. dollar denominated-assets and bringing their wealth back home. Hence the selling pressure on the dollar.
But you can see that it's not a clear "short Dollar" environment. The dollar rallied on Friday in a classic safe-haven play (see the Dollar during the 2008 crash).
Take this with a grain of salt because I don't trade currencies. IMO currencies is one of the hardest markets to trade - in many cases, it's better to trade bonds than currencies.
Yardeni writes: "Conspiracy theories are usually wrong even though they seem to explain a lot. The latest conspiracy theory floating on social media is that President Donald Trump is causing a recession to bring interest rates down to reduce the federal government's net interest outlays and to lower mortgage rates to make homes more affordable. A recession would also weaken the foreign exchange value of the dollar, which would boost exports and depress imports. Trump's tariffs should force manufacturers to move to the US and reduce foreign demand for American farm products, which would lower food prices in the US. What about the stock market crash? Not that many Americans own stocks, according to this conspiracy theory".
Maybe there is truth to this? Otherwise not sure I understand his tariffs rational and rhetoric. But what are they missing ? Isn't comparative advantage a key rule for economic prosperities globally and tariffs go against this evidence? cheers
Yea I saw that on X. In my opinion, it makes no sense.
If Trump is purposely causing a recession to bring down interest rates, what follows?
The U.S. government will need to borrow more trillions $ for fiscal stimulus, just as they did in 2008 and COVID. That would simply balloon the debt even more!
right...I would agree, so it still might be a negotiation tactic but jeez this is taking his real estate playbook to real life politics/economics, dangerous stuff... We really need a quick success with couple of countries (ie agreement on tariffs), showcase a way to get off ramp those tariffs so Wall st can breath...otherwise we're in for tough weeks ahead with no end in sight...
Yea, this is basically high stakes poker. Insanely high stakes poker.
Just found your work and can say that I love the way you present the data. Awesome stuff!
Thank you for reading!