US Yield Curve & Fed Rate Monitor
Crypto Market Tracker
Key Macro & Technicals
Market Commentary
· FX markets continuing with USD weakness with Dollar Index -2.3% since 23/04. Key mover was TWD which gained 11.2% apparently on FDI inflows and improvement in equity sentiments. There is even a gap in the chart which has since been filled. Other gainers have been AUD/$ and NZD/$ which both appreciated 4.7% whilst KRW and MYR havew rallied 5.8% and 5.6% respectively
·
On 02/05,
Eurozone manufacturing PMI sees fastest growth in 3Y from low 43 in 06/23 to
reach 49 on 04/25 which is significant. On 01/05, BoJ cut its economic growth
forecast by ½ for 2025 to 0.5%, which is another piece of evidence that Trump’s
escalating trade war with friends and foes is hurting the global economy. It
also cut its growth forecast for 2026 to 0.7% from 1% prior projection. China
also reported that its factory activity contracted in April at the fatest pace
in 16M whilst IMF warned that global trade war will stymie growht particularly
in the US.
·
On 05/05, Ed
Yardeni lowered the probability of a US recession to 35%, reversing a March
increase to 45% as he belives China and US both may be ready to suspend their
tariffs while they negotiate a trade deal. Yardeni also cited political
considerations are Trump may be motivated to resolve trade tensions ahead of
midterm elections to help Repulicans preserve their congressional majorities.
·
On 04/05, US
unemployment rate increased to 4.2% from 3.4% in 2023 and layoffs jumped +60%
in April to +105k according to Chalelnger, Gray and Christmas, partially due to
DOGE job cuts. US GDP also contracted by 0.3% last quarter driven by companies
pulling forward imports to avoid Trump’s tariffs and an increase in gold
trading activity. Businesses are increasingly pressing
·
On 03/05,
economist see a darkening outlook for the US economy but are sticking by
projections for 2 interest rate cuts from the Fed. ¾ of them surveyed by
Bloomberg predict a recession or a zero-growth scenario that narrowly avoids a
recession in the next 12M up from 26% in March. Median estimates still saw the
Fed cutting only by 25 bps in Sep and Dec 2025. Fed officials have so far left
interest rates unchanged YTD.
·
For equities, the
relief rally due to Trump’s back pedalling has caused SPX and MSCI World to
surge 3.5% and 5.4% in a matter of weeks. Key benefiary of this sentiment boost
has been MSCI Europe and MSCI Asia ex-Japan which gained 8.5% and 12%
respectively. China A-Shares been resilient but only gained 0.9% - 1.5%.
Interestingly, HSI and HSCEI surged by 9% and 7.6% demonstrating that foreign
capital have come into those market to play the China story this time round. In
particular, the HSI is trading well within the existing congestion channel. Indian
equities also done well with SENSEX and Nifty both +9.2% and +9.4%
respectively. Sector-wise moemntum
stocks are in favor with MTUM +8.1% which makes total sense.
·
Volatility
indices unsuprisingly have all dropped 15.4 – 35.4% due to the same relief
rally except for OVX which gained 16.1%. Upon closer inspection, oil prices
been on the downtrend since Ukraine War 2022 which explains the vol spike.
Fixed income markets havent been seeing much action given rate pause by the Fed
earlier. REITs are all in positive territory gaining 1 – 8.6% with AXSR and IYR
being the clear outperformers. AXSR actually continues the long-term flag
breakout pattern which happened as far back as 2020.
·
US officials are
now exploring ways of challenging the tax-exempt status of non-profit
organisations headed by new IRS lawyer Andrew De Mello. Trump also said he
would revoke Harvard University tax-exempt status as part of his wider attack
on elite universities he deems left-wing and anti-American.
·
On 02/05, Trump’s
de minimis exemption expired and the 145% tariff went into immediate effect onn
all products ordered directly from China-based retailers. Almost 1B low-cost
packages worth more than $66B were imported to the US in 2023 and 67.4% were from
China. Shein, Temu and Amazon and plenty of smallewr firms reply on imports and
build their business models about the de minimis exemption. Last month, Shen
and Temu started hiking prices which wont help Trump’s approval rating which is
down to less than 42% in part due to concerns about the direct of the economy
and impact of tariffs. Trump had labelled the de minimis exemption a “big scam”
adding “were putting an end to it”.
·
On 03/05, US
Secretary of Commerce Howard Lutnick says factory gigs are the “great jobs of
the future” that Gen Z could work in for the rest of their life and so could
their grandkids. Whilst Lutnick says this is all part of Trump’s larger planb
to make America more independent from foreign imports and services, the
adminstration targeted deportation of immigrants has left many domestic
manufacturers scrambling for labor. To keep up with supply, people have to fill
the plant jobs and Lutnicks technicians tending to the factory robots are the
next hot gig.
·
On 23/04, Trumps
softened his tone again on China saying he will be “very nice” in negotiations
with Beijing in hopes of securing a trade deal. Trump also insisted that XJP
called him despite Beijing’s denial and said “I don’t think that a sign of
weakness on XJP behalf”. He also back-tracked his threats to fire Fed Chair
Powell but added he would like him to be “a little more active” on cutting
interest rates. This comes after calling Powell a major loser whose
“termination cannot come soon enough”.
·
On 03/05, Warren
Buffet sounded the alam on the USD warning that America’s fiscal recklessness
could erode the value of it own currency. He noted that government behaviour
increasingly seemed designed to weaken the dollar, not protect it. And whlist
he acknowledged the dollar remained dominant globally, he made it clear he is
looking elsewhere – point to Berkshire’s increased exposure to JPY as a
strategic move. This rare warning comes at a time that Berkshire been selling
stocks for 10 straight quarters, dumping $134B in 2024 including trimming its
massive Apple and BofA shares. The company’s cash pile now stands at $347B
which is a record high, signalling Buffett is bracing for macroeconomic
turbulence.
·
On 30/04, Mark
Mobius said that he is keeping the bulk of his funds’ holdings in cash as he
waits out the trade-related uncertainty which is likely to persist for up to
6M. “At this stage, cash is king. So 95% of my money in the funds are in cash”
said by Mobius in an interview on Bloomberg TV. He also added that he will not
hold so much cash for more than 3 – 4M and start to deploy some of the funds
depending on where the opportunities are.
·
On 29/04, Trump
is tipped to partially ease the effect of his tariffs on autos, bocking duties
on cars made overseas from stacking on top of broader levies he has imposed.
WSJ also added that some tariffs on froeign parts used to manufacture cars in
the US will be relaxed as well. This moves will mean autos will not need to pay
higher tariffs for items like steel and alumnium nothing that carmakers will
also be able to ask for reimbursement for any tariffs they have already paid.
Automakers were able to secure these actions by committing to help advance
Trump’s goal of promoting domestic manufacturing
·
On 28/04, markets
were rattled when US Treasury Secretary Scott Bessent said it “was up to China
to de-escalate” tariffs and there are growing worries that unless there is a
breakthrough, permanent damage will be wrought on supply chains. China has
moved to make some exemptions but has held off stimulus, betting Washington
blinks first. Peter Navarro is the hardline pro-tariff advocate on one side
whilst Bessent and Lutnick are pro-free trade. Apparently, Beesent and Lutnick
pleaded with Trump to paus the reciprocal tariffs as the bond market was
starting to falter.
·
On 27/04, Scott
Bessent also ednied US-China tariffs talks despite Trump claims. Trump has in
recent weeks showed some openness to a deescalation in trade tensions with
China, amid growing concerns over the eocnomic impact of a trade war. Trump
also signalled that tariffs against China could come down althrough this would
require Beijing to come to the negotiating table.
·
The thesis that
the US govt could live off tariff revenue is a big stretch as in 2024, about
50% of all US federal revenue came from individual income taxes and whilst
tariff revenue has been pouring into the Treasury at a record amount in 04/25,
the revenue may not even be enough to p;ay for the extensions of the Tax Cuts
and Jobs Act, let along anything else. SCB strategist Steven Englander said
that whilst US collected custom duties $15B in the first 16 business days of
April which is +130% from 2024, the increase in tariff revenue is likely tot
total a little less than 0.4% of GDP over a fully year. Also, whilst tariffs
are lifting government revenue they could also trigger inflation.
·
A theory emerging
is that the cross-messaging and chaotic nature of the Trump’s tariff rollout
could be part of a carefully executed game theory. Bessent is calling it
“strategic uncertainty” and that Trump has shown the stick via high tariffs and
the carrot is the opponent taking off their tariffs and non-tariff trader
barriers.
·
On 28/04, there
was a rally earlier driven de-escalation of the trade war with China,
Trump/Powell feud and rising anticipation for the announcemnt of numerous
treade deals and solid Q1 earnings according to the Stevens Report. The
strategist also pointed out that tension between Trump and Fed Chair Jerome
Powell are far from resolved. Trump understands that firing Powell would hammer
markets so he probably wont try it but that doesn’t mean negative headlines are
done. Looking ahead, its is very unlikely that the 2025 S&P 500 EPS
expectations stay at $270 and reduction to $260 seem appropriate.
·
On 28/04, JPM
strategist Mislav Matejka maintain a cautious stance amid elevated macro risks,
softening data and continued trade policy uncertainty. Stosk may become more
attractive to buy in the 2H25 as despite soft economic indicators such as
consumer sentiment, future output expectations and labor market perceptions
deteriorating, hard data like industrial production and job gains remain
resilient. Regionally, Matejka believes international markets currently offer a
better risk-reward profile than the US without the potential to outperform in
both recessionary and recovery scenarios.
·
Commodities
havent really moved much with SPGCSI -0.3% last few weeks which is unsurprising
given the oil futures representing the commodity futures with the highest
trading volume continue to trade weak. Only XAU/$ and XAG/% have gained 7% and
5.2% respectively. Crypto currencies also lacklustre with BTC/$ still stuck
below $100 handle. Even DOGE/$ only gained 8.8% which is tiny by crypto
standards.
·
On 04/05, oil
prices declined but pared back earlier losses after OPEC+ group singal it will
further increase production in the coming months by 411k barrels per day. The
increase is nearly 3x the volume initially signaled with key contributors KSA
and Russia. Barclays analyst have lowered their Brent forecast to $66/bbl for
2025 and $60/bbl for 2026 on the back of this development.
·
On 28/04, JPM has
reaffirmed it bullish stance on EMEA gold mining sector, forecasting as much as
60 – 90% upside if gold prices reach $4000 per ounce by mid-2026. The bank also
emphasized the macro backdrop namely stagflation risk, recession fears and
global policy uncertainty continue to support strong institutional and retail
gold demand. They also added that
“increased probabilities and potential for quicker Fed cuts in response further
reinforce this bullish narrative”
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