For Posterity. He certainly wasted no time; hit the ground running – and swinging. President Trump is setting the standard for swift execution of campaign promises. And it’s refreshing to see the President of the United States available to field questions from the press. There has been no shortage of vigor or fight in the first five days of what will undoubtedly be an historic four years.
January 20 – Wall Street Journal (Molly Ball): “If he came in the first time unexpectedly, he returned as a conqueror. And so Donald Trump stood in the Capitol’s marble rotunda, surrounded by the titans of power and industry, taking the reins of a government he is more determined than ever to bend to his singular will. The newly sworn-in 47th president pulled no punches in his combative inaugural speech, decrying to their faces the ‘radical and corrupt establishment’ that he said had ‘extracted power and wealth from our citizens while the pillars of our society lay broken and seemingly in complete disrepair.’ He laid out a sweeping and disruptive agenda, vowing to liberate the country from its decadeslong malaise, restore its lofty ambitions and plant its flag on Mars. In a tone at once subdued and defiant, he enumerated his grievances while pledging to pacify ‘a world that has been angry, violent and totally unpredictable.’”
January 20 – Financial Times (Molly Ball): “Donald Trump promised a ‘golden age of America’, as he used his inaugural address to unveil sweeping moves to undo Joe Biden’s policies and reverse a ‘crisis of trust’ he said had engulfed the government. The new president announced aggressive new steps to boost energy production and curb immigration as he vowed to quickly deliver on the populist and nationalist platform that swept him to victory… Within hours of the speech, Trump rescinded dozens of Biden’s executive orders relating to everything from advancing racial equity and sanctioning extremist Israeli settlers in the West Bank, to strengthening Medicaid and promoting access to voting… ‘I was saved by God to make America great again,’ he said, in a speech that included echoes of his dystopian description of ‘American carnage’ in his first inaugural address in 2017.”
To offer context, I lean heavily on my macro analytical framework. The world has reached the fraught “terminal phase” of a historic multi-decade super cycle. A period of profound change: monumental technological advancement, policy experimentation, financial innovation, and economic development, with the Internet fundamentally altering social and political behavior.
An unprecedented global financial Bubble unleashed destabilizing wealth inequality – within and between households, communities, regions, and nations. The Internet ensures that myriad injustices, real and perceived, are constantly in our face. Misinformation, conspiracy theories and propaganda run amok. And as traditional norms fade into oblivion, a void is filled by pernicious endeavors for sport and profit.
A jumbled “world order” is at risk of detonating. Wars and the risk of catastrophic war. Climate change, the risk of cataclysmic change, and now commonplace natural disasters. Perceptions of the future have done a disorienting 180: From a tradition of optimism to gloom and foreboding. Populations are worried. People are angry and hankering to cast blame. Mainly, there is a cloud of corrosive insecurity that has distorted how societies function.
Donald Trump and the populist MAGA movement will be studied for generations. President Trump has a unique capacity to tap into anger, bitterness, and insecurity. He is the master at pinpointing sources to blame for the injustices that so many are feeling: immigration; a dysfunctional federal government; the “establishment;” “deep state;” corruption; liberalism; cultural decay; a history of leadership unwilling to demand the world stop taking advantage of the United States; participation in global institutions and arrangements to the perceived detriment of our national interests.
At home and abroad, citizens (voters and otherwise) these days embrace “strongman” leadership. Traditional leaders and parties, unable to allay fears and insecurities, are viewed as ineffective, often incompetent, and worse. Extraordinary powers are surrendered to “strongmen” prepared to forcefully address grievance and injustice.
January 21 – Axios (Zachary Basu): “President Trump moved to obliterate the outer bounds of executive power Monday, igniting a series of constitutional showdowns that could curtail — or enable — his vision for a maximalist second term. Within hours of taking office, Trump dared the courts, Congress and his fragmented opposition to stand in the way of what could be his most enduring legacy: a radical expansion of presidential power. He did so publicly and with a flourish — signing an initial batch of executive orders in front of a roaring crowd at Capitol One Arena, before returning to the White House. There, Trump signed a barrage of executive orders, announced that Canada and Mexico are likely to face 25% tariffs beginning Feb. 1, and pardoned roughly 1,500 Jan. 6 defendants. Trump also commuted the sentences of 14 Oath Keepers and Proud Boys convicted of seditious conspiracy— an extraordinary act of clemency for far-right extremists who sought to overthrow the government on Jan. 6.”
The Economist: “Welcome to Donald Trump’s Imperial Presidency.” We’re witnessing an inordinate concentration of power that will challenge our system of checks and balances and the separation of powers between our three branches of government. One individual to almost singularly determine tariffs and U.S. trade policy; to declare a national energy emergency; to negotiate the fate of Tic Tok; to repudiate the 14th Amendment; to terminate U.S. involvement in the Paris Agreement and World Health Organization; to suspend participation in the Global Tax Deal; to repeal climate change initiatives; to quash government DEI programs; to ban federal officials from compelling social media companies to combat disinformation, etc.
I think most of us are open to some much-needed “disruption” in Washington. Immigration, over-regulation, and the “deep state” provide easy, appealing targets. The President’s base is absolutely giddy. Problems solved; commonsense, finally.
But it’s a complex, hostile and alarmingly uncertain world. Not amenable to quick solutions, the greatest risks facing our nation - and the world - demand deep analysis, long-term planning and strategy, difficult decisions, sacrifice, and steadfast resolve through thick and thin. Fixation on the “enemy from within” sucks oxygen from the identification of, and preparation for, more threatening enemies and risks.
An increasingly fraught geopolitical backdrop creates a non-negligible and growing risk of “WWIII.” A strategic focus demands resolve to buttress our allies and alliances, rather than the instant gratification of extracting trade concessions from our circle of like-minded partners. And I fear myriad consequences from disavowing climate science and abandoning American global leadership on such a monumental and pressing issue. President Trump is a strong leader. Great leadership can require pulling a nation into undertakings and challenges its population might not fully appreciate it needs to pursue.
With speculative marketplaces notoriously focused on the immediate, risk markets took the spectacle of Trump exercising unparalleled power all in stride. At least for week one, the President and Wall Street had a deal: no tariff directives, with markets revering the jubilant coronation of our nation’s 47th President. In general, markets afford President Trump incredible leeway, confident that he understands the risks to his agenda posed by market instability.
January 19 – Financial Times: “Dealmaking, deregulation and threats to global trade are expected to dominate the conversation among executives gathering in Davos this week, as Donald Trump’s return to the White House shifts the focus of business leaders away from social issues towards growth… The incoming US president… has promised to sign dozens of executive orders upon taking office, including moves to increase US energy production and cut red tape. ‘It is all about growth’, said Simon Freakley, chief executive of consultancy AlixPartners. ‘Every investor worships at the altar of growth, every CEO serves at the altar of growth and is thinking about how to drive growth in this environment.’”
The Trump administration is unleashing a comprehensive pro-growth agenda. Manufacture in the U.S. or we’ll tariff you. “Drill, baby, drill.” Dismantle regulations across industries that had constrained investment. Crush climate-related initiatives. Lean on the banks and Wall Street to finance whatever. Ride the wave.
January 21 – Bloomberg (Craig Stirling): “President Donald Trump faces a host of headwinds that could thwart his ability to generate a boom for the US economy, according to Harvard University Professor Ken Rogoff… The former chief economist of the International Monetary Fund said the policies promised this time around are less likely to help growth compared to his first term in the White House. ‘Every campaign promise practically is something counter productive — I mean you can go to the tariffs, social security being not taxed, and on and on and on,’ Rogoff told… Bloomberg... ‘It’s less obvious that he has the same room to run with his policies. And when he came interest rates were zero. Now they’re not… If we’re just looking at policies, the things that he did in the first term I think on the whole were constructive for the economy — deregulation, the tax cuts, getting rid of the state and local deduction… He has a lot of constraints that he didn’t face the first time. So I don’t think you can expect quite the boom we got the last time.’”
The President does face various headwinds. For now, his pro-growth agenda also enjoys powerful hurricane-force tailwinds that were mere gentle summer breezes in 2017. Importantly, financial conditions are meaningfully looser today. For example, high yield spreads to Treasuries traded at 390 in January 2017, versus this week’s 256 bps (within three bps of lows back to June ’07). Total Non-Financial Debt (NFD) expanded $2.003 TN during 2016. NFD likely surpassed $3.5 TN last year. The $587 billion fiscal deficit was less than a third of fiscal 2024.
Today’s unique market environment is dominated by historically powerful forces (“inflationary biases”) that hardly registered in January 2017, including “basis trade” speculative leverage, AI, “private Credit,” and manic speculative excess (i.e., stocks, crypto and leveraged lending).
January 22 – Bloomberg (Cliff Venzon and Andreo Calonzo): “President Donald Trump announced a joint venture to fund AI infrastructure worth billions of dollars with the leaders of Softbank, OpenAI, and Oracle. $500 Billion Goal: Trump was joined by Softbank’s Masayoshi Son, OpenAI’s Sam Altman, and Oracle’s Larry Ellison. The joint venture will deploy $100 billion ‘immediately’ with a goal of increasing to ‘at least’ $500 billion in AI projects, including data centers and physical campuses, Son said. Companies including Microsoft and Nvidia are also expected to participate. ‘We’re starting off with tremendous investment coming into our country at levels that nobody’s really ever seen before,’ Trump said…”
January 22 – Bloomberg (Jackie Davalos and Shirin Ghaffary): “Over the past two years, the Biden administration struck a careful balance on artificial intelligence. The White House took steps to ensure the US stayed ahead of China in developing the technology while also trying to address some of AI’s many potential risks. In his first 24 hours back in Washington, Donald Trump sent a different message to the AI community: Just build. On Monday, Trump rescinded Biden’s sweeping executive order on AI. The move immediately halted the implementation of key safety and transparency requirements for AI developers. Some tech leaders attending the World Economic Forum in Davos praised his approach. Other experts warned against an AI world with fewer guardrails.”
The runaway AI Bubble is in no need of extraneous pumping out of Washington, though it’s obviously too big and consequential not to be opportunistically embraced by the new administration (ditto, to a lesser degree, crypto). “In a rare break with Trump, Musk… poured cold water on the project, writing: ‘They don’t actually have the money’” (from the FT). Musk’s comment raises interesting issues. First, we’re witnessing an extraordinarily high-stakes arms race. Trillions will be spent, and there will be ghastly roadkill (investors, speculators, companies, lenders, industries, nations).
A Trump initiative with his AI archenemy, which could expand to a half trillion dollars, must trigger a spike in Elon’s stress hormones. Second, with the Wall Street debt machine (certainly including “subprime” “private-Credit”) running white hot, players in the space today basically enjoy unlimited access to finance.
January 21 – Wall Street Journal (Vicky Ge Huang and Caitlin Ostroff): “The crypto industry eagerly awaited Donald Trump’s return to the White House. Now, it’s reeling after the president and first lady launched a pair of meme coins. Dubbed $TRUMP and $MELANIA, the tokens have no economic purpose—their value is largely based on the popularity of internet memes. The market cap of the president’s coin has soared to $8.4 billion since Friday night’s launch, while the first lady’s token is worth about $800 million, according to CoinMarketCap. By selling coins known for their speculative nature and extreme volatility, the president has undermined the credibility that the industry has worked hard to build in recent years, some crypto executives and investors say. They also point to the brazen conflict of interest: Trump benefits directly from the sale of the tokens while setting the policy that affects how markets are valued and regulated.”
The Donald and Melania pre-inauguration crypto “meme coins” evoked the memory of George W. Bush’s assessment of President Trump's first Inaugural Address: “That’s some weird shit.” As someone deeply concerned by our nation’s fateful obsession with speculating and gambling, the President and First Lady introducing their own “coins” must signal peak speculative Bubble. Pottersville.
President Trump spent Friday surveying the damage caused by devastating natural disasters in North Carolina and California. For a Bubble economy that already enjoys a notable head of steam, massive climate-relating rebuilding and spending further elevate overheating risks. Moreover, the unfolding AI spending boom is poised to be highly destabilizing. Meta Platforms Friday announced plans for $65 billion of AI-related spending this year, 27% ahead of analyst expectations – including a new data center “so large that it would cover a significant part of Manhattan.” Zuckerberg: “This is a massive effort…” Others, certainly including the fellow “oligarchy” and nations globally, all plan their own massive efforts. Ensuring sufficient energy, cooling, and communications infrastructure will require more massive efforts.
The Treasury market was eerily subdued all week. Trading within a narrow range of 13 bps, 10-year yields ended the week a basis point lower. Currencies were anything but subdued. “Trump Unleashed Surprise Global Rally by Backing off Key Promise.” Markets positioned for aggressive day one tariff directives were caught off guard. Emerging market currencies in particular were squeezed sharply higher. The Dollar Index dropped 1.7%, the largest weekly decline since November 2023.
With so much at stake, bond investors will want to keep their cool. The big question is how long they can hold out. The bond market has the capacity to curb the President’s seemingly unchecked power. Bond “vigilantes” are not drinking the pro-growth Kool-Aid. They’re instead staring anxiously at an overheating economy, massive debt issuance as far as the eye can see, and a highly levered marketplace. Bonds are in a tough spot. The longer market yields readily accommodate intense demand for borrowings, the higher yields will have to rise to arrest the boom.
January 24 – New York Times (Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Edmund Lee): “President Trump had just dodged a softball question from Bank of America’s Brian Moynihan, and instead went after him, accusing the lending giant of routinely debanking many of his supporters, a hot-button issue among conservatives. ‘Brian got whacked,’ was how one prominent executive described the frosty exchange... It didn’t seem to diminish the bullish mood that’s hung over Davos all week, as executives here celebrated Trump’s low-tax, low-regulation policy agenda. But it was another reminder — as if business leaders needed one — that Trump has thrown out the old rules of engagement between Washington and C-suites.”
Perhaps mere coincidence, but earlier in the week BofA’s CEO had made on-target – and surely unappreciated by the new administration – comments suggesting the Fed might need to factor in Trump’s growth agenda in its policy thinking (I’m reminded of Musk’s “The Fed is absurdly overstaffed” tweet a few days after the Fed’s December 18th hawkish pivot).
January 21 – Yahoo Finance (Brian Sozzi): “The Federal Reserve now needs to be on Trump watch if it wants to engineer the proper dose of monetary policy, according to Bank of America chief Brian Moynihan. ‘They’ve got a new administration with a new set of fiscal policies, and the monetary policy has to respond to that,’ the BofA chair and CEO told Yahoo Finance… Moynihan added: ‘We are not a central bank-led economy. We’re actually a private sector-led economy, of which the government supports, of which the central bank responds to, and they have to think of what stimulus they’re going to respond to.’”
The C-suite must stay in line. Bishops in line. Disloyalty not tolerated. “Kill the chicken to show the monkey.” Disaffected first-term cabinet members under various serious threats lose security detail. And Jay Powell may enjoy job security for now, but challenges are about to turn more exacting.
January 23 – Bloomberg (Skylar Woodhouse): “President Donald Trump questioned Federal Reserve Chair Jerome Powell’s decision-making on interest rates and said he planned to speak to the central bank chief ‘at the right time.’ ‘I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision,’ Trump said, in an apparent reference to Powell, while speaking to reporters from the Oval Office… ‘If I disagree, I will let it be known.’”
January 23 – Reuters (Echo Wang, Marwa Rashad and Trevor Hunnicutt): “U.S. President Donald Trump demanded OPEC lower oil prices and the world drop interest rates in a speech to global business and political leaders and warned them they will face tariffs if they make their products anywhere but the U.S. ‘I’ll demand that interest rates drop immediately. And likewise, they should be dropping all over the world,’ Trump said via video to the World Economic Forum… ‘I'm also going to ask Saudi Arabia and OPEC to bring down the cost of oil.’”
January 24 – Financial Times (Richard Milne, Gideon Rachman and James Politi): “Donald Trump insisted he was serious in his determination to take over Greenland in a fiery telephone call with Denmark’s prime minister… The US president spoke to Mette Frederiksen, the Danish premier, for 45 minutes last week… Frederiksen said she had emphasised that the vast Arctic island — an autonomous part of the kingdom of Denmark — was not for sale, while noting America’s ‘big interest’ in it. Five current and former senior European officials briefed on the call said the conversation had gone very badly… Trump had been aggressive and confrontational following the Danish prime minister’s comments that the island was not for sale, despite her offer of more co-operation on military bases and mineral exploitation. ‘It was horrendous,’ said one of the people. Another added: ‘He was very firm. It was a cold shower. Before, it was hard to take it seriously. But I do think it is serious, and potentially very dangerous.’ ‘The intent was very clear. They want it. The Danes are now in crisis mode’… Another said: ‘The Danes are utterly freaked out by this.’ A former Danish official added: ‘It was a very tough conversation. He threatened specific measures against Denmark such as targeted tariffs.’”
A few Friday evening headlines from the Financial Times: “The Big Read: Trump’s New Economic War.” “Marco Rubio Demands Immediate Halt to Virtually All US Foreign Aid.” “Mexico and Canada Forge United Front in Face of Donald Trump’s Tariff Threats.”
The world may have a penchant for strongman leadership, but it’s surely in no mood to be bullied by Donald Trump. It would be fascinating to monitor international communications between governments. Will there be movement toward forging a more united front?
I recall President Trump arguing that “trade wars are easy to win.” Risk is mounting for trade wars, where everyone loses. Obviously, President Trump won’t immediately negotiate an end to the Ukraine war.
January 22 – Reuters (David Lawder and Daphne Psaledakis): “U.S. President Donald Trump said… he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine, and added that these could also be applied to ‘other participating countries.’ In a post on Truth Social, Trump modified comments he made on Tuesday that he would likely impose sanctions against Russia if President Vladimir Putin refused to negotiate an end to the nearly three-year conflict. ‘If we don't make a ‘deal,’ and soon, I have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries,’ Trump said.”
Does the President really believe sanctions would force Putin to the negotiating table? With Trump poised to pull the plug on additional Ukrainian military aid, the Russian dictator might instead have his sights on Kiev. And it doesn’t help the situation that there’s growing discord among NATO countries. Why would Putin not seek to exploit this weakness?
January 22 – Bloomberg (Foster Wong): “Chinese leader Xi Jinping hailed his country’s ties with Russia during a video call with Vladimir Putin a day after Donald Trump’s inauguration as US president, signaling a resolve to deepen their alliance. Xi said he’s willing to work with his Russian counterpart to take bilateral relations to new heights, vowing to leverage the resilience and stability of the ties to respond to ‘external uncertainties’…”
January 24 – Bloomberg: “President Donald Trump said he’d prefer not to have to impose tariffs on China, his latest dovish remark toward the world’s second-biggest economy even as he continues to threaten sweeping action. ‘We have one very big power over China, and that’s tariffs, and they don’t want them,’ the US leader told… Sean Hannity… ‘And I’d rather not have to use it. But it’s a tremendous power over China.’”
Global markets rallied Friday after President Trump’s “rather not” place tariffs on China comment. Don’t expect Trump tariff threats to pack much of a punch with Beijing either. I’ll assume a united Russia/China front resolved to foil Trump bullying. Will Xi Jinping see an opportunity to further ratchet up pressure on Taiwan? What about mounting Iran nuke risk?
Our nation faces threatening adversaries in an unstable world. Burdened by overconfidence, the President’s hubris on the international front is especially unsettling. Unfortunately, it will require so many things going right – tremendous luck – for this to be the start of some American “golden age.”
January 21 – Reuters (David Brunnstrom, Michael Martina and Daphne Psaledakis): “During his first term in office, U.S. President Donald Trump applied his particular brand of diplomacy with Washington’s adversaries, publicly befriending Russia and North Korea while separately piling pressure on China and Iran. This time he faces a different kind of challenge: a more united group of U.S. antagonists who have drawn closer following Russia's 2022 invasion of Ukraine. Trump… has vowed to end Russia’s war in Ukraine, curb Iran’s nuclear program and counter China while building up the U.S. military.”
January 21 – Financial Times (Andy Bounds, Laura Dubois, Ben Hall and Laura Pitel): “European Commission president Ursula von der Leyen has warned that the world economy has ‘started fracturing along new lines’ after Donald Trump threatened sweeping tariffs on the bloc… Von der Leyen said it was in ‘no one’s interest to break the bonds in the global economy’… She cautioned against a ‘race to the bottom’ on global trade… Germany’s Green vice-chancellor Robert Habeck warned that tariffs would push up inflation and promote geopolitical divisions, saying he woke up on Tuesday with a ‘queasy feeling in the pit of my stomach’… He urged Europe not to ‘let ourselves be pushed around’ by the US."
January 20 – Wall Street Journal (Molly Ball): “If he came in the first time unexpectedly, he returned as a conqueror. And so Donald Trump stood in the Capitol’s marble rotunda, surrounded by the titans of power and industry, taking the reins of a government he is more determined than ever to bend to his singular will. The newly sworn-in 47th president pulled no punches in his combative inaugural speech, decrying to their faces the ‘radical and corrupt establishment’ that he said had ‘extracted power and wealth from our citizens while the pillars of our society lay broken and seemingly in complete disrepair.’ He laid out a sweeping and disruptive agenda, vowing to liberate the country from its decadeslong malaise, restore its lofty ambitions and plant its flag on Mars. In a tone at once subdued and defiant, he enumerated his grievances while pledging to pacify ‘a world that has been angry, violent and totally unpredictable.’”
January 20 – Financial Times (Molly Ball): “Donald Trump promised a ‘golden age of America’, as he used his inaugural address to unveil sweeping moves to undo Joe Biden’s policies and reverse a ‘crisis of trust’ he said had engulfed the government. The new president announced aggressive new steps to boost energy production and curb immigration as he vowed to quickly deliver on the populist and nationalist platform that swept him to victory… Within hours of the speech, Trump rescinded dozens of Biden’s executive orders relating to everything from advancing racial equity and sanctioning extremist Israeli settlers in the West Bank, to strengthening Medicaid and promoting access to voting… ‘I was saved by God to make America great again,’ he said, in a speech that included echoes of his dystopian description of ‘American carnage’ in his first inaugural address in 2017.”
To offer context, I lean heavily on my macro analytical framework. The world has reached the fraught “terminal phase” of a historic multi-decade super cycle. A period of profound change: monumental technological advancement, policy experimentation, financial innovation, and economic development, with the Internet fundamentally altering social and political behavior.
An unprecedented global financial Bubble unleashed destabilizing wealth inequality – within and between households, communities, regions, and nations. The Internet ensures that myriad injustices, real and perceived, are constantly in our face. Misinformation, conspiracy theories and propaganda run amok. And as traditional norms fade into oblivion, a void is filled by pernicious endeavors for sport and profit.
A jumbled “world order” is at risk of detonating. Wars and the risk of catastrophic war. Climate change, the risk of cataclysmic change, and now commonplace natural disasters. Perceptions of the future have done a disorienting 180: From a tradition of optimism to gloom and foreboding. Populations are worried. People are angry and hankering to cast blame. Mainly, there is a cloud of corrosive insecurity that has distorted how societies function.
Donald Trump and the populist MAGA movement will be studied for generations. President Trump has a unique capacity to tap into anger, bitterness, and insecurity. He is the master at pinpointing sources to blame for the injustices that so many are feeling: immigration; a dysfunctional federal government; the “establishment;” “deep state;” corruption; liberalism; cultural decay; a history of leadership unwilling to demand the world stop taking advantage of the United States; participation in global institutions and arrangements to the perceived detriment of our national interests.
At home and abroad, citizens (voters and otherwise) these days embrace “strongman” leadership. Traditional leaders and parties, unable to allay fears and insecurities, are viewed as ineffective, often incompetent, and worse. Extraordinary powers are surrendered to “strongmen” prepared to forcefully address grievance and injustice.
January 21 – Axios (Zachary Basu): “President Trump moved to obliterate the outer bounds of executive power Monday, igniting a series of constitutional showdowns that could curtail — or enable — his vision for a maximalist second term. Within hours of taking office, Trump dared the courts, Congress and his fragmented opposition to stand in the way of what could be his most enduring legacy: a radical expansion of presidential power. He did so publicly and with a flourish — signing an initial batch of executive orders in front of a roaring crowd at Capitol One Arena, before returning to the White House. There, Trump signed a barrage of executive orders, announced that Canada and Mexico are likely to face 25% tariffs beginning Feb. 1, and pardoned roughly 1,500 Jan. 6 defendants. Trump also commuted the sentences of 14 Oath Keepers and Proud Boys convicted of seditious conspiracy— an extraordinary act of clemency for far-right extremists who sought to overthrow the government on Jan. 6.”
The Economist: “Welcome to Donald Trump’s Imperial Presidency.” We’re witnessing an inordinate concentration of power that will challenge our system of checks and balances and the separation of powers between our three branches of government. One individual to almost singularly determine tariffs and U.S. trade policy; to declare a national energy emergency; to negotiate the fate of Tic Tok; to repudiate the 14th Amendment; to terminate U.S. involvement in the Paris Agreement and World Health Organization; to suspend participation in the Global Tax Deal; to repeal climate change initiatives; to quash government DEI programs; to ban federal officials from compelling social media companies to combat disinformation, etc.
I think most of us are open to some much-needed “disruption” in Washington. Immigration, over-regulation, and the “deep state” provide easy, appealing targets. The President’s base is absolutely giddy. Problems solved; commonsense, finally.
But it’s a complex, hostile and alarmingly uncertain world. Not amenable to quick solutions, the greatest risks facing our nation - and the world - demand deep analysis, long-term planning and strategy, difficult decisions, sacrifice, and steadfast resolve through thick and thin. Fixation on the “enemy from within” sucks oxygen from the identification of, and preparation for, more threatening enemies and risks.
An increasingly fraught geopolitical backdrop creates a non-negligible and growing risk of “WWIII.” A strategic focus demands resolve to buttress our allies and alliances, rather than the instant gratification of extracting trade concessions from our circle of like-minded partners. And I fear myriad consequences from disavowing climate science and abandoning American global leadership on such a monumental and pressing issue. President Trump is a strong leader. Great leadership can require pulling a nation into undertakings and challenges its population might not fully appreciate it needs to pursue.
With speculative marketplaces notoriously focused on the immediate, risk markets took the spectacle of Trump exercising unparalleled power all in stride. At least for week one, the President and Wall Street had a deal: no tariff directives, with markets revering the jubilant coronation of our nation’s 47th President. In general, markets afford President Trump incredible leeway, confident that he understands the risks to his agenda posed by market instability.
January 19 – Financial Times: “Dealmaking, deregulation and threats to global trade are expected to dominate the conversation among executives gathering in Davos this week, as Donald Trump’s return to the White House shifts the focus of business leaders away from social issues towards growth… The incoming US president… has promised to sign dozens of executive orders upon taking office, including moves to increase US energy production and cut red tape. ‘It is all about growth’, said Simon Freakley, chief executive of consultancy AlixPartners. ‘Every investor worships at the altar of growth, every CEO serves at the altar of growth and is thinking about how to drive growth in this environment.’”
The Trump administration is unleashing a comprehensive pro-growth agenda. Manufacture in the U.S. or we’ll tariff you. “Drill, baby, drill.” Dismantle regulations across industries that had constrained investment. Crush climate-related initiatives. Lean on the banks and Wall Street to finance whatever. Ride the wave.
January 21 – Bloomberg (Craig Stirling): “President Donald Trump faces a host of headwinds that could thwart his ability to generate a boom for the US economy, according to Harvard University Professor Ken Rogoff… The former chief economist of the International Monetary Fund said the policies promised this time around are less likely to help growth compared to his first term in the White House. ‘Every campaign promise practically is something counter productive — I mean you can go to the tariffs, social security being not taxed, and on and on and on,’ Rogoff told… Bloomberg... ‘It’s less obvious that he has the same room to run with his policies. And when he came interest rates were zero. Now they’re not… If we’re just looking at policies, the things that he did in the first term I think on the whole were constructive for the economy — deregulation, the tax cuts, getting rid of the state and local deduction… He has a lot of constraints that he didn’t face the first time. So I don’t think you can expect quite the boom we got the last time.’”
The President does face various headwinds. For now, his pro-growth agenda also enjoys powerful hurricane-force tailwinds that were mere gentle summer breezes in 2017. Importantly, financial conditions are meaningfully looser today. For example, high yield spreads to Treasuries traded at 390 in January 2017, versus this week’s 256 bps (within three bps of lows back to June ’07). Total Non-Financial Debt (NFD) expanded $2.003 TN during 2016. NFD likely surpassed $3.5 TN last year. The $587 billion fiscal deficit was less than a third of fiscal 2024.
Today’s unique market environment is dominated by historically powerful forces (“inflationary biases”) that hardly registered in January 2017, including “basis trade” speculative leverage, AI, “private Credit,” and manic speculative excess (i.e., stocks, crypto and leveraged lending).
January 22 – Bloomberg (Cliff Venzon and Andreo Calonzo): “President Donald Trump announced a joint venture to fund AI infrastructure worth billions of dollars with the leaders of Softbank, OpenAI, and Oracle. $500 Billion Goal: Trump was joined by Softbank’s Masayoshi Son, OpenAI’s Sam Altman, and Oracle’s Larry Ellison. The joint venture will deploy $100 billion ‘immediately’ with a goal of increasing to ‘at least’ $500 billion in AI projects, including data centers and physical campuses, Son said. Companies including Microsoft and Nvidia are also expected to participate. ‘We’re starting off with tremendous investment coming into our country at levels that nobody’s really ever seen before,’ Trump said…”
January 22 – Bloomberg (Jackie Davalos and Shirin Ghaffary): “Over the past two years, the Biden administration struck a careful balance on artificial intelligence. The White House took steps to ensure the US stayed ahead of China in developing the technology while also trying to address some of AI’s many potential risks. In his first 24 hours back in Washington, Donald Trump sent a different message to the AI community: Just build. On Monday, Trump rescinded Biden’s sweeping executive order on AI. The move immediately halted the implementation of key safety and transparency requirements for AI developers. Some tech leaders attending the World Economic Forum in Davos praised his approach. Other experts warned against an AI world with fewer guardrails.”
The runaway AI Bubble is in no need of extraneous pumping out of Washington, though it’s obviously too big and consequential not to be opportunistically embraced by the new administration (ditto, to a lesser degree, crypto). “In a rare break with Trump, Musk… poured cold water on the project, writing: ‘They don’t actually have the money’” (from the FT). Musk’s comment raises interesting issues. First, we’re witnessing an extraordinarily high-stakes arms race. Trillions will be spent, and there will be ghastly roadkill (investors, speculators, companies, lenders, industries, nations).
A Trump initiative with his AI archenemy, which could expand to a half trillion dollars, must trigger a spike in Elon’s stress hormones. Second, with the Wall Street debt machine (certainly including “subprime” “private-Credit”) running white hot, players in the space today basically enjoy unlimited access to finance.
January 21 – Wall Street Journal (Vicky Ge Huang and Caitlin Ostroff): “The crypto industry eagerly awaited Donald Trump’s return to the White House. Now, it’s reeling after the president and first lady launched a pair of meme coins. Dubbed $TRUMP and $MELANIA, the tokens have no economic purpose—their value is largely based on the popularity of internet memes. The market cap of the president’s coin has soared to $8.4 billion since Friday night’s launch, while the first lady’s token is worth about $800 million, according to CoinMarketCap. By selling coins known for their speculative nature and extreme volatility, the president has undermined the credibility that the industry has worked hard to build in recent years, some crypto executives and investors say. They also point to the brazen conflict of interest: Trump benefits directly from the sale of the tokens while setting the policy that affects how markets are valued and regulated.”
The Donald and Melania pre-inauguration crypto “meme coins” evoked the memory of George W. Bush’s assessment of President Trump's first Inaugural Address: “That’s some weird shit.” As someone deeply concerned by our nation’s fateful obsession with speculating and gambling, the President and First Lady introducing their own “coins” must signal peak speculative Bubble. Pottersville.
President Trump spent Friday surveying the damage caused by devastating natural disasters in North Carolina and California. For a Bubble economy that already enjoys a notable head of steam, massive climate-relating rebuilding and spending further elevate overheating risks. Moreover, the unfolding AI spending boom is poised to be highly destabilizing. Meta Platforms Friday announced plans for $65 billion of AI-related spending this year, 27% ahead of analyst expectations – including a new data center “so large that it would cover a significant part of Manhattan.” Zuckerberg: “This is a massive effort…” Others, certainly including the fellow “oligarchy” and nations globally, all plan their own massive efforts. Ensuring sufficient energy, cooling, and communications infrastructure will require more massive efforts.
The Treasury market was eerily subdued all week. Trading within a narrow range of 13 bps, 10-year yields ended the week a basis point lower. Currencies were anything but subdued. “Trump Unleashed Surprise Global Rally by Backing off Key Promise.” Markets positioned for aggressive day one tariff directives were caught off guard. Emerging market currencies in particular were squeezed sharply higher. The Dollar Index dropped 1.7%, the largest weekly decline since November 2023.
With so much at stake, bond investors will want to keep their cool. The big question is how long they can hold out. The bond market has the capacity to curb the President’s seemingly unchecked power. Bond “vigilantes” are not drinking the pro-growth Kool-Aid. They’re instead staring anxiously at an overheating economy, massive debt issuance as far as the eye can see, and a highly levered marketplace. Bonds are in a tough spot. The longer market yields readily accommodate intense demand for borrowings, the higher yields will have to rise to arrest the boom.
January 24 – New York Times (Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Edmund Lee): “President Trump had just dodged a softball question from Bank of America’s Brian Moynihan, and instead went after him, accusing the lending giant of routinely debanking many of his supporters, a hot-button issue among conservatives. ‘Brian got whacked,’ was how one prominent executive described the frosty exchange... It didn’t seem to diminish the bullish mood that’s hung over Davos all week, as executives here celebrated Trump’s low-tax, low-regulation policy agenda. But it was another reminder — as if business leaders needed one — that Trump has thrown out the old rules of engagement between Washington and C-suites.”
Perhaps mere coincidence, but earlier in the week BofA’s CEO had made on-target – and surely unappreciated by the new administration – comments suggesting the Fed might need to factor in Trump’s growth agenda in its policy thinking (I’m reminded of Musk’s “The Fed is absurdly overstaffed” tweet a few days after the Fed’s December 18th hawkish pivot).
January 21 – Yahoo Finance (Brian Sozzi): “The Federal Reserve now needs to be on Trump watch if it wants to engineer the proper dose of monetary policy, according to Bank of America chief Brian Moynihan. ‘They’ve got a new administration with a new set of fiscal policies, and the monetary policy has to respond to that,’ the BofA chair and CEO told Yahoo Finance… Moynihan added: ‘We are not a central bank-led economy. We’re actually a private sector-led economy, of which the government supports, of which the central bank responds to, and they have to think of what stimulus they’re going to respond to.’”
The C-suite must stay in line. Bishops in line. Disloyalty not tolerated. “Kill the chicken to show the monkey.” Disaffected first-term cabinet members under various serious threats lose security detail. And Jay Powell may enjoy job security for now, but challenges are about to turn more exacting.
January 23 – Bloomberg (Skylar Woodhouse): “President Donald Trump questioned Federal Reserve Chair Jerome Powell’s decision-making on interest rates and said he planned to speak to the central bank chief ‘at the right time.’ ‘I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision,’ Trump said, in an apparent reference to Powell, while speaking to reporters from the Oval Office… ‘If I disagree, I will let it be known.’”
January 23 – Reuters (Echo Wang, Marwa Rashad and Trevor Hunnicutt): “U.S. President Donald Trump demanded OPEC lower oil prices and the world drop interest rates in a speech to global business and political leaders and warned them they will face tariffs if they make their products anywhere but the U.S. ‘I’ll demand that interest rates drop immediately. And likewise, they should be dropping all over the world,’ Trump said via video to the World Economic Forum… ‘I'm also going to ask Saudi Arabia and OPEC to bring down the cost of oil.’”
January 24 – Financial Times (Richard Milne, Gideon Rachman and James Politi): “Donald Trump insisted he was serious in his determination to take over Greenland in a fiery telephone call with Denmark’s prime minister… The US president spoke to Mette Frederiksen, the Danish premier, for 45 minutes last week… Frederiksen said she had emphasised that the vast Arctic island — an autonomous part of the kingdom of Denmark — was not for sale, while noting America’s ‘big interest’ in it. Five current and former senior European officials briefed on the call said the conversation had gone very badly… Trump had been aggressive and confrontational following the Danish prime minister’s comments that the island was not for sale, despite her offer of more co-operation on military bases and mineral exploitation. ‘It was horrendous,’ said one of the people. Another added: ‘He was very firm. It was a cold shower. Before, it was hard to take it seriously. But I do think it is serious, and potentially very dangerous.’ ‘The intent was very clear. They want it. The Danes are now in crisis mode’… Another said: ‘The Danes are utterly freaked out by this.’ A former Danish official added: ‘It was a very tough conversation. He threatened specific measures against Denmark such as targeted tariffs.’”
A few Friday evening headlines from the Financial Times: “The Big Read: Trump’s New Economic War.” “Marco Rubio Demands Immediate Halt to Virtually All US Foreign Aid.” “Mexico and Canada Forge United Front in Face of Donald Trump’s Tariff Threats.”
The world may have a penchant for strongman leadership, but it’s surely in no mood to be bullied by Donald Trump. It would be fascinating to monitor international communications between governments. Will there be movement toward forging a more united front?
I recall President Trump arguing that “trade wars are easy to win.” Risk is mounting for trade wars, where everyone loses. Obviously, President Trump won’t immediately negotiate an end to the Ukraine war.
January 22 – Reuters (David Lawder and Daphne Psaledakis): “U.S. President Donald Trump said… he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine, and added that these could also be applied to ‘other participating countries.’ In a post on Truth Social, Trump modified comments he made on Tuesday that he would likely impose sanctions against Russia if President Vladimir Putin refused to negotiate an end to the nearly three-year conflict. ‘If we don't make a ‘deal,’ and soon, I have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries,’ Trump said.”
Does the President really believe sanctions would force Putin to the negotiating table? With Trump poised to pull the plug on additional Ukrainian military aid, the Russian dictator might instead have his sights on Kiev. And it doesn’t help the situation that there’s growing discord among NATO countries. Why would Putin not seek to exploit this weakness?
January 22 – Bloomberg (Foster Wong): “Chinese leader Xi Jinping hailed his country’s ties with Russia during a video call with Vladimir Putin a day after Donald Trump’s inauguration as US president, signaling a resolve to deepen their alliance. Xi said he’s willing to work with his Russian counterpart to take bilateral relations to new heights, vowing to leverage the resilience and stability of the ties to respond to ‘external uncertainties’…”
January 24 – Bloomberg: “President Donald Trump said he’d prefer not to have to impose tariffs on China, his latest dovish remark toward the world’s second-biggest economy even as he continues to threaten sweeping action. ‘We have one very big power over China, and that’s tariffs, and they don’t want them,’ the US leader told… Sean Hannity… ‘And I’d rather not have to use it. But it’s a tremendous power over China.’”
Global markets rallied Friday after President Trump’s “rather not” place tariffs on China comment. Don’t expect Trump tariff threats to pack much of a punch with Beijing either. I’ll assume a united Russia/China front resolved to foil Trump bullying. Will Xi Jinping see an opportunity to further ratchet up pressure on Taiwan? What about mounting Iran nuke risk?
Our nation faces threatening adversaries in an unstable world. Burdened by overconfidence, the President’s hubris on the international front is especially unsettling. Unfortunately, it will require so many things going right – tremendous luck – for this to be the start of some American “golden age.”
January 21 – Reuters (David Brunnstrom, Michael Martina and Daphne Psaledakis): “During his first term in office, U.S. President Donald Trump applied his particular brand of diplomacy with Washington’s adversaries, publicly befriending Russia and North Korea while separately piling pressure on China and Iran. This time he faces a different kind of challenge: a more united group of U.S. antagonists who have drawn closer following Russia's 2022 invasion of Ukraine. Trump… has vowed to end Russia’s war in Ukraine, curb Iran’s nuclear program and counter China while building up the U.S. military.”
January 21 – Financial Times (Andy Bounds, Laura Dubois, Ben Hall and Laura Pitel): “European Commission president Ursula von der Leyen has warned that the world economy has ‘started fracturing along new lines’ after Donald Trump threatened sweeping tariffs on the bloc… Von der Leyen said it was in ‘no one’s interest to break the bonds in the global economy’… She cautioned against a ‘race to the bottom’ on global trade… Germany’s Green vice-chancellor Robert Habeck warned that tariffs would push up inflation and promote geopolitical divisions, saying he woke up on Tuesday with a ‘queasy feeling in the pit of my stomach’… He urged Europe not to ‘let ourselves be pushed around’ by the US."
For the Week:
The S&P500 gained 1.7% (up 3.7% y-t-d), and the Dow rose 2.2% (up 4.4%). The Utilities added 0.7% (up 5.2%). The Banks gained 1.0% (up 8.0%), and the Broker/Dealers surged 4.1% (up 11.3%). The Transports advanced 1.1% (up 4.5%). The S&P 400 Midcaps increased 1.1% (up 5.0%), and the small cap Russell 2000 rose 1.4% (up 3.5%). The Nasdaq100 gained 1.6% (up 3.6%). The Semiconductors added 0.6% (up 7.3%). The Biotechs surged 3.5% (up 7.9%). With bullion surging $67, the HUI gold index jumped 3.1% (up 11.0%).
Three-month Treasury bill rates ended the week at 4.20%. Two-year government yields declined two bps to 4.27% (up 2bps y-t-d). Five-year T-note yields slipped a basis point to 4.43% (up 4bps). Ten-year Treasury yields dipped one basis point to 4.62% (up 5bps). Long bond yields declined a basis point to 4.85% (up 6bps). Benchmark Fannie Mae MBS yields slipped a basis point to 5.88% (up 3bps).
Italian 10-year yields added one basis point to 3.66% (up 13bps y-t-d). Greek 10-year yields jumped 11 bps to 3.42% (up 20bps). Spain's 10-year yields increased a basis point to 3.19% (up 13bps). German bund yields added three bps to 2.57% (up 20bps). French yields declined one basis point to 3.30% (up 1bps). The French to German 10-year bond spread narrowed four to 72 bps. U.K. 10-year gilt yields declined three bps to 4.63% (up 6bps). U.K.'s FTSE equities index was unchanged (up 4.0% y-t-d).
Japan's Nikkei 225 Equities Index rallied 3.9% (up 0.1% y-t-d). Japanese 10-year "JGB" yields rose three bps to 1.23% (up 13bps y-t-d). France's CAC40 jumped 2.8% (up 7.4%). The German DAX equities index rose 2.4% (up 7.5%). Spain's IBEX 35 equities index added 0.6% (up 3.3%). Italy's FTSE MIB index slipped 0.2% (up 5.9%). EM equities were mixed. Brazil's Bovespa index was little changed (up 1.8%), while Mexico's Bolsa index rose 2.8% (up 3.7%). South Korea's Kospi increased 0.5% (up 5.7%). India's Sensex equities index declined 0.6% (down 3.0%). China's Shanghai Exchange Index increased 0.3% (down 3.0%). Turkey's Borsa Istanbul National 100 index gained 1.3% (up 2.8%).
Federal Reserve Credit declined $17.8 billion last week to $6.788 TN. Fed Credit was down $2.101 TN from the June 22, 2022, peak. Over the past 280 weeks, Fed Credit expanded $3.062 TN, or 82%. Fed Credit inflated $3.977 TN, or 142%, over the past 637 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt recovered $18.4 billion last week to $3.259 TN. "Custody holdings" were down $98.4 billion y-o-y, or 2.9%.
Total money market fund assets jumped $41.7 billion to $6.903 TN. Money funds were up $769 billion over 26 weeks (25% annualized) and $942 billion y-o-y (16%).
Total Commercial Paper gained $11.7 billion to $1.157 TN. CP was down $94 billion, or 7.5%, over the past year.
Freddie Mac 30-year fixed mortgage rates fell eight bps this week to 6.96% (up 27bps y-o-y). Fifteen-year rates dropped 11 bps to 6.16% (up 20bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down a basis point to 7.13% (up 11bps).
Currency Watch:
For the week, the U.S. Dollar Index dropped 1.7% to 107.443 (down 1.0% y-t-d). For the week on the upside, the Brazilian real increased 2.8%, the British pound 2.6%, the Mexican peso 2.6%, the Swedish krona 2.5%, the Norwegian krone 2.3%, the New Zealand dollar 2.2%, the euro 2.2%, the Australian dollar 2.0%, the South Korean won 1.9%, the Singapore dollar 1.7%, the Swiss franc 1.0%, the Canadian dollar 1.0%, and the Japanese yen 0.2%. The Chinese (onshore) renminbi rallied 1.16% versus the dollar (up 0.8% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index slipped 0.3% (up 4.7% y-t-d). Spot Gold jumped 2.5% to $2,771 (up 5.6%). Silver added 0.7% to $30.585 (up 5.8%). WTI crude dropped $3.22, or 4.1%, to $74.66 (up 4%). Gasoline dropped 3.0% (up 1%), while Natural Gas gained 2.0% to $4.027 (up 12%). Copper fell 1.1% (up 7%). Wheat rose 1.0% (down 1%), and Corn added 0.5% (up 6%). Bitcoin added $170 or 0.2%, to $104,500 (up 11.5%).
Trump Administration Watch:
January 19 – Yahoo Finance (Rick Newman): “Donald Trump is used to managing debt. But not like this. As a real estate developer, Trump relied heavily on borrowed money to fund projects. Trouble paying back his debts contributed to six business bankruptcies. Trump battled back by writing off some loans, refinancing others, finding new lenders, and changing his business model. The public debt Trump will inherit as the 47th president is a completely different problem. The national debt will exceed $36 trillion when he takes office on Jan. 20, up from $20 trillion when he started his first term in 2017. As a percentage of GDP, debt held by the public has jumped from 75% in 2017 to 96% today. These numbers will only get worse… The main question is when markets will start punishing Uncle Sam for profligate borrowing…”
January 21 – Yahoo Finance (Ben Werschkul): “Donald Trump’s first day in office featured a flurry of executive moves he was able to dramatically sign with a stroke of the pen. High atop his agenda for the second day is a topic that won’t be quite so simple: the debt ceiling. In fact, Trump is deeply unhappy the issue is on the table at all. The newly inaugurated president is set for a meeting with congressional leaders Tuesday afternoon to, in part, hash out a strategy for maintaining US creditworthiness and the government's ability to service the $36 trillion debt. It’s an issue with a range of political landmines and one Trump can't ignore.”
January 22 – New York Times (Andrew Duehren): “When House Republicans gathered behind closed doors on Capitol Hill last week to hash out their plans for cutting taxes, Representative David Schweikert, an Arizona Republican, sounded a note of caution. The United States’ fiscal problems were at risk of spiraling out of control, Mr. Schweikert told his colleagues. He warned that investors on Wall Street were starting to think twice about lending to the United States, a potential loss of confidence in Washington’s tax and spending plans that could ripple across the economy. ‘This ain’t a game,’ Mr. Schweikert, a member of the House Ways and Means Committee, said... ‘This needs to temper both how we approach policy and how we communicate that policy.’”
January 21 – New York Times (Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Edmund Lee): “In a stark display of money and power, the three wealthiest men on the planet lined up on Monday in the Capitol Rotunda to witness Donald Trump being sworn in as the 47th president. The message was clear: With a president in office who wants to be known as a deal maker, Washington is open for business. The three men, Elon Musk, Jeff Bezos and Mark Zuckerberg, collectively worth close to a trillion dollars, were seated in front of Trump’s cabinet picks and behind his family, creating what might be a hierarchy of influence. The visuals spoke volumes… The inauguration… was a marked contrast to Trump’s first presidential run, when tech titans (and other business leaders) largely ignored him and only reluctantly showed up to a summit after he won the White House.”
January 22 – Bloomberg (Nancy Cook and Nacha Cattan): “House Republicans are in talks over raising the cap for state and local tax deductions after winning pledges from President Donald Trump and congressional leaders to include the measure in a must-pass tax bill this year. New York Republicans are having discussions about how to raise the $10,000 SALT cap so that their constituents can deduct more local income and real estate taxes from federal bills. Lawmakers are hoping to come up with a figure for the deduction cap in the coming weeks… GOP Representative Nicole Malliotakis said. ‘We looked at increasing the deduction, perhaps putting in some income restrictions so it’s not going to billionaires. We talked about possibly the marriage penalty. We talked about if second properties would be allowed for deduction,’ Malliotakis said. She said increasing the SALT cap to $20,000 would not be enough.”
January 21 – CNBC (Lora Kolodny): “President Donald Trump said… that he’d consider the possibility of Tesla CEO Elon Musk or Oracle Chairman Larry Ellison purchasing TikTok. At a press briefing to announce a joint venture for investing in artificial intelligence infrastructure, Trump was asked by a reporter if he was open to ‘Elon buying TikTok.’ ‘I would be if he wanted to buy it, yes,’ Trump said in response. ‘I’d like Larry to buy it, too.’”
January 21 – Financial Times (Claire Jones, Aime Williams, Jude Webber in Dublin, Peter Foster, Andy Bounds and Emma Agyemang): “Donald Trump has threatened to double tax rates for foreign nationals and companies in the US to hit back at ‘discriminatory’ levies on American multinationals, in a move that threatens to trigger a global confrontation over tax regimes. In a memo outlining his ‘America First’ trade policy on Monday, the US president referred to an obscure 90-year-old provision of the US tax code — Section 891 — that empowers him to retaliate against foreign countries by imposing punitive taxes on their citizens and businesses in America… His order… specifically asks the Treasury secretary to ‘investigate whether any foreign country subjects US citizens or corporations to discriminatory or extraterritorial taxes’ so it conforms with Section 891. This section says that when a president formally declares there is such discrimination, the tax rates should ‘be doubled in the case of each citizen and corporation of such foreign country” — without needing Congressional approval.’”
January 23 – CNBC (Jeff Cox): “President Donald Trump lobbed his first volley at the Federal Reserve, saying… that he will apply pressure to bring down interest rates… ‘I’ll demand that interest rates drop immediately,’ Trump said. ‘And likewise, they should be dropping all over the world. Interest rates should follow us all over.’ The comments represented an initial strike at Fed officials, with whom he had a highly contentious relationship during his first term in office.”
January 23 – Associated Press (Zeke Miller, Josh Boak and Jamey Keaten): “President Donald Trump used an address… to the World Economic Forum to promise global elites lower taxes if they bring manufacturing to the U.S. and threatened to impose tariffs if they don’t. Speaking by video… to the annual summit in Davos, Switzerland…, Trump ran through his flurry of executive actions since his swearing-in and claimed that he had a ‘massive mandate’ from the American people to bring change. He laid out a carrot-and-stick approach for private investment in the U.S. ‘Come make your product in America and we will give you among the lowest taxes as any nation on earth… But if you don’t make your product in America, which is your prerogative, then very simply, you will have to pay a tariff — differing amounts — but a tariff, which will direct hundreds of billions of dollars and even trillions of dollars into our treasury to strengthen our economy and pay down debt under the Trump administration.’”
January 23 – Associated Press (Jon Gambrell): “Saudi Arabia’s crown prince said… the kingdom wants to invest $600 billion in the United States over the next four years, comments that came after President Donald Trump earlier put a price tag on returning to the kingdom as his first foreign trip. Trump’s 2017 trip to Saudi Arabia upended a tradition of U.S. presidents first heading to the United Kingdom as their first trip abroad. It also underscored his administration’s close ties to the rulers of the oil-rich Gulf states as his eponymous real estate company has pursued deals across the region as well.”
January 20 – Financial Times (Aime Williams and Myles McCormick): “US President Donald Trump has said he will withdraw the US from the historic Paris climate agreement, dealing a blow to worldwide efforts to slow global warming following the hottest year on record. The decision was announced… among a flurry of pro-fossil fuel policies after Trump took the oath of office with a promise to ‘drill, baby, drill’ in pursuit of what he called ‘American energy dominance’. ‘The president will unleash American energy by ending Biden’s policies of climate extremism,’ the White House said. The US’s exit from the 2015 Paris accord, which was signed by almost 200 countries, means the world’s largest historical polluter will again walk away from its commitment to curb greenhouse gas emissions.”
January 22 – Bloomberg (Skylar Woodhouse and Hadriana Lowenkron): “President Donald Trump proposed turning disaster assistance over to individual states to distribute rather than having the Federal Emergency Management Agency respond, ahead of a trip to survey flood damage in North Carolina and wildfires in California. ‘All it does is complicate everything,’ Trump said in an interview with Fox News... ‘FEMA has not done their job for the last four years.’ Trump added that he would ‘rather see the states take care of their own problems’ and that ‘the federal government can help them out with the money.’”
January 24 – Associated Press (Linley Sanders): “Americans see the federal government as rife with corruption, inefficiency and red tape — but they’re less sure about whether Elon Musk is the right person to fix it. A new poll from The Associated Press-NORC Center for Public Affairs Research shows that only about 3 in 10 U.S. adults strongly or somewhat approve of President Trump’s creation of an advisory body on government efficiency, which Musk is helming. About 4 in 10 disapprove, while the rest were neutral or didn’t know enough to say.”
Trade War Watch:
January 22 – Bloomberg (Josh Wingrove and Hadriana Lowenkron): “President Donald Trump widened his tariff threats to include China and the European Union on his second day back in office after day one saw Canada and Mexico in his sights. ‘We’re talking about a tariff of 10% on China, based on the fact that they’re sending fentanyl to Mexico and Canada,’ Trump said… Tuesday, specifying Feb. 1 as a possible date. ‘Other countries are big abusers also, you know it’s not just China,’ Trump said. ‘We have a $350 billion deficit with the European Union. They treat us very very badly, so they’re going to be in for tariffs.’”
January 22 – New York Times (Ana Swanson): “When President Trump refrained from immediately imposing new tariffs on his first day in office, as he had previously threatened, business executives and others who support international trade breathed a sigh of relief. That relief has been short-lived. On Monday night, just hours after his inauguration speech, Mr. Trump said he planned to put a 25% tariff on products from Canada and Mexico by Feb. 1, claiming the countries were allowing ‘mass numbers of people and fentanyl’ to come to the United States. On Tuesday evening, Mr. Trump expanded the threat and said he also intends to put an additional 10% tariff on Chinese products by the same date, saying China was sending fentanyl to Mexico and Canada. The statements leave just 10 days before significant levies would go into effect on the United States’ three largest trading partners…”
January 22 – Reuters (Juveria Tabassum): “As U.S. President Donald Trump mulls imposing 25% duties on imports from Canada and Mexico on Feb. 1, focus has shifted to the sectors likely to bear the brunt of the tariffs. About 28%, or about $844 billion, of all U.S. imports in 2024 came from the two neighboring countries… The automobile industry accounted for imports of more than $202 billion from Canada and Mexico combined.”
January 22 – New York Times (Ana Swanson): “The Trump administration intends to push to renegotiate the U.S. trade deal with Canada and Mexico ahead of a required 2026 review of it, seeking to shore up U.S. auto jobs and counter Chinese firms that are making inroads into the Mexican auto sector, people familiar… said. The U.S.-Mexico-Canada Agreement, which Mr. Trump signed in 2020, required the three countries to hold a ‘joint review’ of the deal after six years, on July 1, 2026. But Mr. Trump intends to begin those negotiations sooner…”
January 21 – Associated Press (Rob Gillies): “Canada’s outgoing prime minister and the leader of the country’s oil rich province of Alberta are both confident Canada can avoid the 25% tariffs President Donald Trump says he will impose on Feb. 1. Justin Trudeau and Danielle Smith will argue that Canada is the energy super power that has the oil and critical minerals that America needs to feed what Trump vows will be a booming U.S. economy. But Doug Ford, the premier of Ontario, the manufacturing and automobile hub of Canada, said a trade war is 100% coming. Trump ‘declared an economic war on Canada,’ Ford said… ‘And we are going to use every tool in our tool box to defend our economy.’”
January 21 – Wall Street Journal (Paul Vieira): “Canadian Prime Minister Justin Trudeau warned President Trump that his renewed pledge to impose a 25% tariff on all Canadian imports, starting as early as Feb. 1, risks derailing his effort to usher in a ‘golden age’ for America, given the close trading ties between the neighboring countries. Trudeau reiterated… his willingness to retaliate forcefully against U.S. tariffs… and to provide financial support to households and businesses to deal with the consequences from a trade row. ‘Our focus is remaining calm, remaining strong and responding as necessary to actions by the U.S.,’ he told reporters... ‘Our response will be robust, and rapid, and measured, and very strong.’”
January 21 – Bloomberg (Julian Lee): “Russia’s seaborne crude exports saw their biggest drop since November last week after outgoing US President Joe Biden imposed sweeping sanctions on the country’s oil trade, with early signs that the measures are reshaping flows. The slump kept the less volatile four-week average below 3 million barrels a day for a fourth week and close to a recent 16-month low…”
January 21 – Bloomberg (Rebecca Choong Wilkins and Josh Xiao): “Chinese Vice Premier Ding Xuexiang said China will expand its imports, hours after US President Donald Trump left the economy out of countries he’s looking to hit with tariffs imminently. ‘We don’t seek trade surplus. We want to import more competitive, quality products and services to promote balanced trade,’ Ding said…”
LA Wildfire Watch:
January 18 – Bloomberg (Patrick Sisson): “Even as firefighters still struggle to contain the historic wildfires that destroyed thousands of homes in Los Angeles over the past week, questions are swirling about how the city can address a now even-more-dire housing shortage — and how the fires will intersect with the region’s ongoing affordability challenges. More than 12,000 structures — most of them single-family homes — have been destroyed or heavily damaged… ‘This tragedy of the wildfires and the mass displacement that it has caused is going to hugely exacerbate the existing crisis, which points to even more need to expedite housing production,’ said Scott Epstein, director of policy and research for Abundant Housing LA.”
January 18 – Financial Times (Guy Chazan and Christopher Grimes): “For the past 70 years, Fox’s Restaurant served pancakes, pork loin and catfish to the people of Altadena in Los Angeles County. That was until last week’s devastating wildfire reduced it to a charred wreck, sparing only the diner’s roadside sign. Paul Rosenbluh, Fox’s owner, now wonders whether there’s any point in staying around to rebuild. ‘You can only live in a disaster zone for so long,’ he says. ‘At one point you say, ‘I just don’t want to deal with this shit any more.’’Tens of thousands of others across Los Angeles are facing the same dilemma…”
Ukraine War Watch:
January 22 – Axios (Ivana Saric): “President Trump threatened on Wednesday to levy fresh tariffs on Russia if the Kremlin does not quickly agree to a deal to end its war in Ukraine… Trump made ending Russia’s invasion of Ukraine a key campaign pledge, but it’s not clear that his new threat will put significant pressure on Russia to change its negotiating posture. Trump wrote on Truth Social… that if a deal to end the war is not reached ‘soon,’ he would have ‘no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries.’ Trump said he wasn’t ‘looking to hurt Russia’ but that the actions were necessary to end the war. ‘I'm going to do Russia, whose Economy is failing, and President Putin, a very big FAVOR,’ he added.”
January 22 – Politico (Veronika Melkozerova): “The Kremlin is not impressed by United States President Donald Trump’s threat to impose new sanctions against Russia if it does not agree to strike a peace deal with Ukraine. ‘We do not see any particular new elements here,’ Kremlin spokesperson Dmitry Peskov told Russian media... Peskov added that Trump ‘liked sanctions’ and used them often during his first presidential term. ‘Russia is ready for an equal and careful dialogue with the United States, which we had during Trump’s first term,’ Peskov said… ‘We are waiting for signals that have not yet been received.’”
Market Instability Watch:
January 21 – Bloomberg (Editorial Board): “Since the start of the new year, the bond market has been urging Congress to come to terms with America’s spiraling budget problems. Soon it might be demanding immediate action. Long-term yields have hovered around 5%. If they stay there, the government’s inflation-adjusted cost of borrowing will likely exceed the economy’s rate of growth — meaning the debt ratio will rise even faster than currently projected and that bigger spending cuts or tax increases will be needed to rein it in. This is what ‘unsustainable’ fiscal policy looks like. Lawmakers haven’t even started talking about this problem, much less grappling with it realistically.”
January 22 – Financial Times (Valentina Romei): “The UK government borrowed far more than expected in December, underlining the scale of the challenge facing chancellor Rachel Reeves as she battles to restore confidence in her fiscal plans and turn around a stagnating economy. Borrowing… was £17.8bn last month, £10.1bn more than in December 2023, and the third highest in any December on record… In the first nine months of the fiscal year borrowing was £129.9bn, which was £8.9bn more than in the same period in the previous fiscal year, and the second-highest for the April to December period since… records began in January 1993.”
January 20 – Financial Times (Ian Smith): “Ray Dalio, the billionaire founder of hedge fund firm Bridgewater Associates, has warned that the UK could be heading for a ‘debt death spiral’, in which it has to borrow more and more money to service its rising interest costs. Dalio told the Financial Times… the market was struggling to absorb the UK’s higher borrowing needs since last October’s Budget. The combination of rising annual interest payments, which have already topped £100bn a year, and the need to roll over debt at higher borrowing costs, created the risk of a self-reinforcing cycle, he said. This ‘looks like a debt death spiral in the making because it will either require more borrowing to service the debt that will have to be serviced, squeeze out other spending, or require more taxes’, said Dalio…”
Global Credit and Financial Bubble Watch:
January 21 – Bloomberg (Olivia Fishlow): “Private credit and insurers are expected to get even closer this year, potentially prompting regulators to inspect ties between the two and any associated risk, according to a Moody’s… report. The ratings firm expects to see more insurers flock to private credit investments, as they continue to search for yield, particularly through asset-based finance opportunities, according to the Tuesday report. Areas of interest include consumer finance, commercial finance, hard assets and financial assets. Private credit funds are also anticipated to look to more retail investor opportunities, according to Moody’s…”
January 23 – Bloomberg (Ellen Schneider, Olivia Fishlow and Carmen Arroyo): “Private credit lenders are flocking to finance large, fast-growing technology companies gearing up to go public… This week, Blackstone Inc. led a private loan of just under $4 billion for Clario, a drug-trial software company looking to go public this year. And earlier this month, a group of lenders including Blackstone, Apollo Global Management Inc. and Blue Owl Capital Inc. inked a $2.75 billion term loan for Databricks Inc., one of the most valuable private software companies in the U.S…. Direct lenders are landing such deals in part because some of these fast-growing tech firms are not making money yet.”
January 22 – Bloomberg (Claire Ruckin, Abhinav Ramnarayan and Jeannine Amodeo): “Booming credit markets are throwing private equity firms a lifeline as they strive to return cash to investors: Instead of relying on the IPO market, they can pile portfolio companies with more debt and give themselves a payout. Dividend recapitalizations, where a firm borrows money for a payout to its owners, are an increasingly popular alternative to the usual dual-track options of listing or selling portfolio companies… The strategy has been used in recent deals… and red-hot demand for corporate bonds and loans means more are likely to follow, bankers said. ‘If they are keen to retain the investment, they can extract money by releveraging the structure and do some exceptional dividends,’ said Alexis Foret, a high yield portfolio manager at Edmond de Rothschild Asset Management... ‘Markets allow for that at the moment.’”
January 21 – Bloomberg (Andrew Kostic): “There are at least 21 lender calls scheduled for Tuesday in the US leveraged loan market as activity this holiday-shortened week began with a flurry. The biggest launch this morning was Athenahealth’s $6 billion Repricing… This year already opened with two $50 billion weeks of launches. Six of the eight all time for the market have occurred in the past two months…”
AI Bubble Watch:
January 21 – Wall Street Journal (Deepa Seetharaman and Tom Dotan): “Some of the world’s most prominent names in technology are pledging to pour as much as half a trillion dollars into building artificial-intelligence infrastructure in the U.S., in the latest high-profile initiative timed with the start of the Trump administration. The joint venture, known as Stargate, is led by the ChatGPT maker OpenAI and the global tech investor SoftBank Group. It will build data centers for OpenAI. The database company Oracle and MGX, an investor backed by the United Arab Emirates, are also equity partners in the venture. The companies are committing $100 billion to the venture and plan to invest up to $500 billion over the next four years. The plans… were announced… at a White House ceremony with President Trump.”
January 22 – Bloomberg (Justin Sink): “Elon Musk openly questioned whether companies that joined President Donald Trump’s announcement promising hundreds of billions of dollars in artificial intelligence infrastructure could follow through on their promises, exposing an early internal rift within the White House. ‘They don’t actually have the money,’ Musk wrote… ‘SoftBank has well under $10B secured. I have that on good authority.’ Trump was joined by SoftBank Group Corp.’s Masayoshi Son, OpenAI’s Sam Altman and Oracle Corp.’s Larry Ellison at the White House to announce the venture, dubbed Stargate, which they said would deploy $100 billion immediately with the goal of eventually spending $500 billion for the construction of data centers and physical campuses. ‘This is to me a very big thing,’ Trump said. ‘I think it’s going to be something that’s very special.’”
January 22 – Financial Times (George Hammond and Myles McCormick): “OpenAI and Microsoft have hit back at Elon Musk’s criticism of Stargate, the new $500bn artificial intelligence infrastructure project hailed by Donald Trump as a ‘resounding declaration of confidence in America’s potential under a new president’. In a rare break with Trump, Musk… poured cold water on the project, writing: ‘They don’t actually have the money.’ He added that he had it ‘on good authority’ that SoftBank had secured less than $10bn. OpenAI’s chief executive Sam Altman responded… that Musk’s claim was ‘wrong, as you surely know’. ‘I realise what is great for the country isn’t always what’s optimal for your companies, but in your new role i hope you’ll mostly put [the US] first,’ he wrote.”
January 24 – Bloomberg (Dana Wollman): “Meta Platforms Inc. plans to invest as much as $65 billion on projects related to artificial intelligence in 2025, including building a giant new datacenter and increasing hiring in AI teams, Chief Executive Officer Mark Zuckerberg said… The company plans to use the funds to build a datacenter ‘so large that it would cover a significant part of Manhattan,’ Zuckerberg said… ‘This is a massive effort, and over the coming years it will drive our core products and business, unlock historic innovation, and extend American technology leadership,’ Zuckerberg wrote… Analysts were expecting capital expenditures of $51.3 billion in 2025…”
January 22 – Wall Street Journal (Lauren Thomas): “Santee Cooper, the big power provider in South Carolina, has tapped financial advisers to look for buyers that can restart construction on a pair of nuclear reactors that were mothballed years ago. The state-owned utility is betting interest will be strong, with tech giants such as Amazon.com and Microsoft in need of clean energy to fuel data centers for artificial-intelligence capabilities… Construction of two nuclear reactors at the V.C. Summer plant was halted in 2017 after Santee Cooper and the plant’s then-co-owner, South Carolina Electric & Gas—now part of Dominion Energy—had already jointly spent around $9 billion.”
Bubble and Mania Watch:
January 22 – Bloomberg (Hannah Levitt): “JPMorgan… dealmakers are spending their time in the Swiss Alps huddling with ebullient clients, but the boss of the biggest US bank is striking a more cautious tone. ‘Asset prices are kind of inflated’ in the US stock market, Chief Executive Officer Jamie Dimon said… from the World Economic Forum… ‘You need fairly good outcomes to justify those prices, and we’re all hoping for that. I think having pro-growth strategies helps make that happen, but there are negatives out there and they can tend to surprise you.’”
January 24 – Bloomberg (Esha Dey): “Shares of US companies roared to a record this week, seemingly shrugging off worries about tariffs, immigration and inflation. Yet, company executives are doing something decidedly less bullish… A gauge of insider sentiment that tallies the number of buyers versus sellers shows there were just 98 companies where at least one insider purchased the company’s shares this month through Jan. 22, compared with 447 at which at least one insider sold, according to… the Washington Service. With a little over a week of trading left in January, that buy-sell ratio, at 0.22, is currently on track to be the lowest in data going back to 1988.”
January 22 – Bloomberg (Lionel Laurent): “As a European who doesn’t own Bitcoin, I enjoy a bit of schadenfreude when the cryptocurrency industry is really upset about something. And the latest bout of outrage is a doozy: The virtual-currency elites who saw Donald Trump as a crypto savior are now upset over his recent multi-billion-dollar Trump-branded meme coin sale. Investor Ari Paul called it ‘fleecing people for billions’; former Trump associate Anthony Scaramucci said it was dictator-level ‘corruption’; ex-Coinbase Global Inc. executive Balaji Srinavasan called it a ‘lottery’ with no wealth creation. Of course, they’re right to take a dim view of the Trump meme coin’s blend of naked cash-grab, MAGA cultism and pump-and-dump tokenomics.”
January 22 – Bloomberg (Lu Wang and Vildana Hajric): “The ETF industry’s upstart-in-chief is back with another roll of the new-product dice — this time betting on a game-changing expansion of Wall Street’s zero-day options boom. Matt Tuttle, who struck gold with leveraged meme-stock funds but fell flat with his Jim Cramer ETFs, has filed to create a line of new offerings that will trade fast-twitch derivatives on popular companies beloved by the retail-investing masses. Think Nvidia Corp., Tesla Inc., MicroStrategy Inc. and more.”
January 23 – Financial Times (Ian Smith and George Steer): “US equities have soared to their most expensive level relative to government bonds in a generation… A record-breaking run for US equities… has pushed the so-called forward earnings yield — expected profits as a percentage of stock prices — on the S&P 500 index down to 3.9%... A sell-off in Treasuries has driven 10-year bond yields up to 4.65%. That means the difference between the two, a measure of the so-called equity risk premium, or the extra compensation to an investor for the risk of owning stocks, has fallen into negative territory and reached a level last seen in 2002 during the dotcom boom and bust.”
January 24 – Bloomberg (Katherine Doherty): “Here’s a surprising new fact about the world’s largest and most-liquid public equity market: Most of the activity on it isn’t public anymore. For the first time on record, the majority of all trading in US stocks is now consistently occurring outside the country’s exchanges… This off-exchange activity — which happens internally at major firms or in alternative platforms known as dark pools — is on course to account for a record 51.8% of traded volume in January.”
U.S./Russia/China/Europe Watch:
January 21 – Wall Street Journal (Matthew Luxmoore): “One day after President Trump pledged at his inauguration to be a ‘peacemaker and unifier,’ the U.S.’s two most powerful adversaries agreed to work more closely on overhauling a world order they see as orbiting around the West… Russian President Vladimir Putin and Chinese leader Xi Jinping promised to work hand-in-hand, in what could prove to be the first indication of a new phase in their deepening confrontation with Washington. Neither side mentioned the U.S. president… But with global attention focused on Trump’s return to office and the flurry of executive orders he has signed, Beijing and Moscow made clear they are still reading from the same page… The Kremlin ensured nobody missed the point. In an unusual move, it published footage from the conversation on its website, showing Putin and Xi exchanging cordial greetings, calling each other ‘dear friend,’ and issuing brief statements about their growing ties…”
January 22 – Bloomberg (Yoshiaki Nohara): “Japanese Foreign Minister Takeshi Iwaya said he and US Secretary of State Marco Rubio agreed to bring their countries’ ties to new heights in their first meeting. Earlier in the week, Iwaya became the first Japanese foreign minister to attend a US presidential inauguration ceremony… A spokesperson for Rubio said the ministers ‘discussed plans to deepen ties during the Trump Administration, and how the US and Japan can work together to counter ongoing threats in the Indo-Pacific and around the world, including joint efforts against China’s destabilizing actions.’”
January 23 – Bloomberg (Cliff Venzon and Andreo Calonzo): “Secretary of State Marco Rubio sparked a sharp rebuke from Beijing over his comments on the South China Sea in one of his first foreign policy statements since taking office. Rubio criticized China’s ‘dangerous and destabilizing’ actions in the South China Sea, a regional flashpoint, while reaffirming defense ties with US allies in Asia. The foreign ministry in Beijing pushed back, saying that the US has ‘no right to interfere’ in the matter. Rubio… reaffirmed Washington’s ‘ironclad’ commitment to defend Manila in a call with Philippine Foreign Affairs Secretary Enrique Manalo… Trump’s top diplomat separately spoke with Indonesian Foreign Minister Sugiono and exchanged views on maritime security in the South China Sea…”
January 17 – Financial Times (Charles Clover, Bita Ghaffari, and Anastasia Stognei): “Iran and Russia have agreed to closer military co-operation and intelligence sharing in a sign of the extent to which the two countries have been driven together by confrontation with the west. President Vladimir Putin and his counterpart Masoud Pezeshkian signed the wide-ranging ‘comprehensive strategic partnership treaty’ in Moscow… The long-anticipated partnership… stopped short of the pledge of mutual military assistance that Putin signed with North Korea in June. But Russia and Iran pledged to work together against common military threats…”
January 22 – Financial Times (Demetri Sevastopulo and Kathrin Hille): “Two Iranian cargo vessels carrying a crucial chemical ingredient for missile propellant will sail from China to Iran over the next few weeks, according to intelligence from… two western countries. The Iranian-flagged ships — the Golbon and the Jairan — are expected to carry more than 1,000 tonnes of sodium perchlorate, which is used to make ammonium perchlorate, the main ingredient for solid propellant for missiles. Two of the officials said the sodium perchlorate could produce 960 tonnes of ammonium perchlorate, which makes up 70% of the propellant for solid-fuel missiles.”
De-globalization Watch:
January 20 – Bloomberg (Vlad Savov): “Sales of Apple Inc. iPhones dived 18.2% in China during the December quarter…, a major setback for the company in its biggest market after the US. The company’s flagship handsets, China’s top sellers a year earlier, relinquished the top spot to Huawei Technologies…”
January 23 – Financial Times (Joe Leahy): “A record number of US companies in China are thinking about moving some operations out of the country or are already in the process of doing so, according to a new study… The annual survey by the American Chamber of Commerce in China found 30% of respondents were exploring alternative sources for goods and relocating manufacturing out of the country last year, or had already done so — double the percentage in 2020.”
Inflation Watch:
January 19 – Wall Street Journal (Paul Kiernan and Anthony DeBarros): “Economists are starting to model the effects of President-elect Donald Trump’s plans to raise tariffs, cut taxes and restrict immigration. The upshot: Inflation and interest rates are likely to be higher for at least the next two years than forecasters anticipated before the election. The consumer-price index is now expected to rise 2.7% in December 2025 from a year earlier, according to the average forecast of 73 economists… In October, the panel saw consumer prices rising 2.3% in 2025. ‘Risks to inflation and interest rates are to the upside with a Trump administration,’ said Augustine Faucher, chief economist at PNC Financial Services Group.”
January 19 – Wall Street Journal (Patrick Thomas and Jesse Newman): “The specter of rising food prices is back. The cost of groceries in the U.S. increased 1.8% from a year earlier in December, rising at the fastest pace in more than a year… There isn’t one factor. Bird flu is killing chickens, cutting egg supplies and sending wholesale prices to a record. Extreme heat and dry weather in the world’s coffee-growing regions have sent the cost of brews surging. Chocolate and cereal makers have raised prices for their products, too.”
January 18 – Associated Press: “Base rates for North Carolina homeowners’ insurance premiums will increase on average by about 15% by mid-2026 as part of a settlement reached by the state Insurance Department and the industry. The agreement… contrasts with the January 2024 request by the North Carolina Rate Bureau, which represents insurance companies, seeking a 42.2% overall average increase.”
January 20 – Bloomberg (Weilun Soon): “The cost to hire an oil supertanker on key routes to China has doubled since the US imposed sanctions on Russia, showing the extent to which the move has upended the global shipping market… Daily rates for very-large crude carriers on the Middle East-to-China route surged 112% to $57,589 in the week through Friday, according to Baltic Exchange data, after Washington sanctioned nearly 160 tankers hauling Russian crude on Jan. 10. Those on the US Gulf-to-China journey jumped 102%, while West Africa-to-China saw an increase of 90%.”
January 22 – Bloomberg (Silla Brush): “BlackRock Inc. Chief Executive Officer Larry Fink said investors are too quick to conclude that high inflation is over, raising the prospect that bond yields will rise along with steeper prices. ‘The biggest risk we have worldwide today is the world believes we are past the high point of inflation,’ Fink told Bloomberg…, noting that his view conflicts with what market forces are saying. ‘I could truly see a scenario where we are going to have elevated inflation.’”
Federal Reserve Watch:
January 19 – Bloomberg (Liz Capo McCormick and Ye Xie): “It’s at best, a longshot, but one that’s emerged among a group of die-hard bond traders — that the Federal Reserve’s next move on interest rates will be up, not down. The wager… stands in stark contrast to the consensus on Wall Street for at least one rate cut this year… Based on options linked to the Secured Overnight Financing Rate, traders currently see about a 25% chance that the Fed’s next move will be to lift rates by year end, according to… Bloomberg Intelligence…”
January 24 – Bloomberg (Leonard Kehnscherper): “The strength of the US economy is making BlackRock Inc. Chief Executive Officer Larry Fink wonder if the Federal Reserve may have to resort to increasing interest rates later after easing in the short term. ‘I am not calling for that,’ Fink commented… ‘I see probabilities’ of a rate hike at some point beyond the next 12 months or so, but he cautioned that such a scenario wasn’t his ‘core prognostication.’ ‘The economy is very strong… It was very strong in the fourth quarter and the evidence that we are hearing from different corporations is that business is strong already in the first quarter.’”
U.S. Economic Bubble Watch:
January 17 – Reuters (David Lawder): “The Congressional Budget Office… forecast a $1.865 trillion U.S. budget deficit for fiscal 2025, largely flat with last year… The CBO ‘baseline’ estimates are based on current laws and assume that Trump's 2017 individual tax cuts expire as scheduled at the end of this year, causing rates to snap back to higher levels. Efforts by Trump and Republicans in Congress to extend current individual and small business tax rates could add over $4 trillion to deficits over 10 years if not offset with savings elsewhere. Other tax breaks promised by Trump, such as exempting Social Security, tip and overtime income from taxation, could add more debt.”
January 21 – Financial Times (Simon Foy and Ortenca Aliaj): “US banks are ‘in the beginning of go-mode’ and ‘animal spirits are alive’, according to a senior JPMorgan… executive, as Wall Street bets that a lighter-touch regulatory regime under President Donald Trump will spur dealmaking in the world’s largest economy. Speaking at the World Economic Forum…, Mary Erdoes, asset and wealth management chief at the Wall Street lender, said it was ‘hopeful’ that Trump’s regulatory approach would boost the US economy, undoing some of the burden placed on the banking industry by Joe Biden’s administration.”
January 18 – Financial Times (Gregory Meyer and Stephen Gandel): “US consumers continued to open their wallets at the start of 2025 after a $1tn spending spree during the holiday season... Retailers rang up $994bn during the 2024 holiday season, with sales rising 4% year on year, the National Retail Federation said… Consumers spent $924bn in total on the debt and credit cards issued by Bank of America, Citigroup, JPMorgan Chase and Wells Fargo in the final three months of 2024. That was up 5% from the prior three months — the highest year-end increase in three years.”
January 22 – Bloomberg (Alex Tanzi): “Americans are rolling over an ever-larger share of their credit card debts even with interest rates near multi-decade highs, a sign of growing strain on consumer finances… Revolving card balances in the third quarter of last year surged to the highest level since at least 2012 when the series began… US consumers had revolving card balances of $645 billion with the large banks in the Philly Fed survey, up by more than 50% from a post-pandemic low in the second quarter of 2021. The delinquency rate has risen too, with some 3.5% of card balances past due by 30 or more days and 1.8% of accounts delinquent. Both figures are more than double the post-pandemic lows recorded in 2021. For about one-tenth of credit-card users, the utilization rate for their cards is close to 95%, meaning that any further spending is increasingly perilous.”
China Watch:
January 20 – Bloomberg (Foster Wong): “President Xi Jinping called for China to implement more proactive macroeconomic policies this year to maintain growth momentum as the world’s No. 2 economy could be facing new US tariffs. The Chinese leader said the country should seek progress while maintaining stability. He also reiterated his call to promote high-level scientific and technological self-reliance, the official Xinhua News Agency reported…”
January 23 – Financial Times (Cheng Leng): “China’s central bank has pumped a record amount of short-term funds into the financial system this week in an effort to pre-empt the cash crunch that usually accompanies the lunar new year holiday. Aimed at smoothing seasonal turbulence, the total cash injection of Rmb2.2tn ($300bn) through the 14-day reserve repo… comes as millions of residents prepare to travel home, settle tax bills and hand out cash-filled red envelopes.”
January 22 – Financial Times (Cheng Leng, Arjun Neil Alim, William Sandlund and Thomas Hale): “Chinese authorities have sought to boost the stock market and restore confidence in the world’s second-largest economy by telling local insurance companies and mutual funds to invest more in domestic stocks. Regulators have told state insurers to invest a minimum of 30% of their new policy premiums in local shares, while mutual funds have been told to increase these shareholdings by 10% annually for the next three years.”
January 19 – Bloomberg: “Chinese officials are taking steps to stabilize operations at China Vanke Co. after deepening liquidity stress and questions surrounding the whereabouts of its top executive triggered turmoil for its bonds and shares last week… Officials of Shenzhen… held a closed-door meeting to discuss Vanke on Friday… The Shenzhen government said during the meeting it plans to ensure that Vanke’s operations remain stable, the people added. The officials also plan to bring in new auditors and financial advisors to assess Vanke’s balance sheet and property projects to pave the way for next steps…”
January 21 – Bloomberg (Shirley Zhao): “China’s luxury market sales are estimated to have plunged as much as 20% in 2024, the steepest since at least 2011, as the country’s economic slowdown dents consumer confidence, according to… Bain & Co. The decline has brought the country’s luxury market size back to near the 2020 level…”Europe Watch:
January 20 – Bloomberg (Ethan Wang, Yukun Zhang and Ryan Woo): “The frugal trend that began in China during the economic disruption of the pandemic and deepened amid the crisis in the property market is intensifying as Gen Z shuns government calls to spend… On China's Instagram-like Xiaohongshu… many under-30s are swapping notes on how to spend less on office lunches and shop on the cheap. Influencers are also sharing tips on turning financial discipline into a lifestyle. Posts on how to save money total more than 1.5 million with more than 130 million views. ‘I feel that the economy is quite bad, and it seems like it’s hard for everyone to make money, so I think it’s important to protect my own wallet,’ said Ava Su…”
Central Bank Watch:
January 22 – Bloomberg (Mark Schroers, Jana Randow and Alexander Weber): “The European Central Bank isn’t lowering interest rates too slowly and will maintain its measured approach to easing monetary policy, President Christine Lagarde told CNBC. ‘We do not see ourselves behind the curve,’ Lagarde said… in Davos, where she’s attending the World Economic Forum. ‘We are on this sort of regular, gradual path.’”
Europe Watch:
January 24 – Bloomberg (Mark Schroers and Alexander Weber): “The euro area’s private sector grew in January after two months of contraction, surprising analysts as the embattled manufacturing sector showed small signs of improvement. S&P Global’s Composite Purchasing Managers’ Index rose to a five-month high of 50.2 from 49.6 the previous month…”
January 19 – Bloomberg (Iain Rogers): “Support for Germany’s conservative opposition fell below 30% for the first time since April in a new poll, though it maintained a wide lead over the far-right Alternative for Germany ahead of next month’s election. Friedrich Merz’s center-right CDU/CSU alliance was in first place with 29% backing in the latest Insa survey… The AfD also lost one point, to 21%, while support for Chancellor Olaf Scholz’s Social Democrats and the Greens was unchanged at 16% and 13%...”
Japan Watch:
January 23 – Associated Press (Yuri Kageyama): “The Bank of Japan raised its key interest rate to about 0.5% from 0.25% Friday, noting that inflation is holding at a desirable target level. ‘The economy is gradually recovering,’ BOJ Gov. Kazuo Ueda told reporters… He acknowledged uncertainties remain, including overseas inflation and foreign exchange fluctuations. But he reaffirmed his view that additional hikes will be needed if the economy remains stable. ‘Our basic thinking has not changed,’ he added, stressing the importance of ‘the positive cycle’ of higher prices and wages.”
January 23 – Reuters (Leika Kihara): “Japan’s core consumer prices rose 3.0% in December from a year earlier to mark the fastest annual pace in 16 months…, keeping alive market expectations that the central bank will keep raising ultra-low interest rates.”
January 22 – Bloomberg (Yoshiaki Nohara): “Japan’s trade surplus with the US last year far surpassed its average levels during President Donald Trump’s first term, risking his ire as the president mulls tariff plans across the world. Japan’s trade surplus with the US last year stood at ¥8.6 trillion ($54.9bn), the fifth largest on record… That’s significantly higher than the average of ¥6.7 trillion during 2017 and 2020…”
Emerging Markets Watch:
January 23 – Reuters (Marcela Ayres): “Investors already concerned about Brazil's ballooning public debt load under veteran leftist President Luiz Inacio Lula da Silva are being forced to reckon with an additional risk: a government debt profile with growing sensitivity to high interest rates. That’s because Latin America's largest economy finances an unusually high portion of its debt through floating-rate bonds crafted to appeal to investors during times of market stress…, leaving the debt with its worst composition in 20 years.”
January 24 – Bloomberg (Andrew Rosati): “Brazil’s annual inflation slowed less than expected in early January despite a drop in energy costs, highlighting the challenges facing policymakers as they prepare to raise the interest rate again next week… Consumer prices rose 4.5% from a year earlier, above the 4.36% median forecast…”
January 23 – Bloomberg (Beril Akman): “Turkey’s central bank cut its main interest rate for a second straight month and signaled similar cuts in future meetings by tweaking its guidance. The Monetary Policy Committee… lowered its one-week repo rate to 45% from 47.5%.”
January 19 – Reuters (Siddhi Nayak): “The stock prices of Indian private lenders that have reported an increase in bad loans in their personal loans and micro-credit businesses are bearing the brunt of investors’ fears of a U-turn in the asset-quality cycle for the country's banks. RBL Bank's shares fell as much as 5.8% on Monday after the lender reported a near 28% sequential jump in… loans… classified as non-performing for the first time.”
Leveraged Speculation Watch:
January 21 – Bloomberg (Nell Mackenzie): “Hedge fund industry lobbyists have sent a wish list to the U.S. Securities and Exchange Commission (SEC) asking for repeals and delays to much of the regulator's hard-hitting agenda on industry transparency. The Managed Fund Association (MFA) on Monday sent a letter to Mark Uyeda, President Donald Trump's pick as acting chair of the U.S. Securities and Exchange Commission, who will take on the role from Gary Gensler…”
January 18 – Wall Street Journal (Caitlin McCabe): “Hedge funds are having a moment… On average, hedge funds gained 10.7% after fees last year, according to PivotalPath... That was the best year since 2020, when they made 11.4% amid pandemic-fueled volatility. Before that, the last time the industry saw double-digit gains was 2013. Every strategy tracked by the research firm made money on average—unusual in an industry where multiple strategies typically falter in any given year.”
January 19 – Financial Times (Harriet Agnew): “Investors in hedge funds have paid out almost half of their profits in fees since the early days of the industry more than half a century ago… Managers generated $3.7tn of total gains before fees, but fees charged to investors were $1.8tn, or about 49% of gross gains, according to… LCH Investments, an investor in hedge funds… ‘Up to the year 2000, the hedge fund fee take had been running at around a third of overall gains, but since then it has increased to a half,’ said Rick Sopher, chief executive of Edmond de Rothschild Capital Holdings and chair of LCH Investments. ‘As returns came down, fees went up.’”
Social, Political, Environmental, Cybersecurity Instability Watch:
January 24 – Associated Press (Alex Veiga): “Economic losses from hurricanes and other natural disasters soared in the U.S. last year and were above average globally, reflecting another year of costly severe storms, floods and droughts. Damage caused by Hurricanes Helene and Milton helped push total economic losses from natural disasters in the U.S. to $217.8 billion last year, according to… Aon PLC. That figure represents an 85.3% increase from 2023… It’s also the largest annual tally of economic losses from natural disasters since 2017.”
January 20 – Bloomberg (Jennifer A. Dlouhy): “US President Donald Trump revoked offshore oil and gas leasing bans that effectively blocked drilling in most US coastal waters as he made sweeping moves his first hours in office to unleash American energy development. Trump’s move came as part of a broad assault on executive orders issued by former President Joe Biden, including revoking his recent decision to bar drilling rigs in some 625 million acres of coastal waters.”
January 22 – Bloomberg (Brian K. Sullivan and Naureen S. Malik): “A deep freeze is straining power supplies across the eastern US, sending demand on the country’s largest electric grid to an all-time winter high as the South digs out from one of the worst snow storms in 130 years. Electricity consumption on the PJM Interconnection LLC grid, which stretches from Washington to Illinois, reached 145 gigawatts, topping the winter record set in 2015. Power prices at PJM’s benchmark Western hub rose as high as $742.91 a megawatt-hour Wednesday morning, more than triple from the same time Tuesday…”
Geopolitical Watch:
January 22 – Reuters (Leela de Kretser): “Iran is ‘pressing the gas pedal’ on its enrichment of uranium to near weapons grade, U.N. nuclear watchdog chief Rafael Grossi said…, adding that Iran's recently announced acceleration in enrichment was starting to take effect. Grossi said last month that Iran had informed the International Atomic Energy Agency that it would ‘dramatically’ accelerate enrichment of uranium to up to 60% purity, closer to the roughly 90% of weapons grade… ‘Before it was (producing) more or less seven kilograms (of uranium enriched to up to 60%) per month, now it’s above 30 or more than that. So I think this is a clear indication of an acceleration. They are pressing the gas pedal,’ Grossi told reporters…”
The S&P500 gained 1.7% (up 3.7% y-t-d), and the Dow rose 2.2% (up 4.4%). The Utilities added 0.7% (up 5.2%). The Banks gained 1.0% (up 8.0%), and the Broker/Dealers surged 4.1% (up 11.3%). The Transports advanced 1.1% (up 4.5%). The S&P 400 Midcaps increased 1.1% (up 5.0%), and the small cap Russell 2000 rose 1.4% (up 3.5%). The Nasdaq100 gained 1.6% (up 3.6%). The Semiconductors added 0.6% (up 7.3%). The Biotechs surged 3.5% (up 7.9%). With bullion surging $67, the HUI gold index jumped 3.1% (up 11.0%).
Three-month Treasury bill rates ended the week at 4.20%. Two-year government yields declined two bps to 4.27% (up 2bps y-t-d). Five-year T-note yields slipped a basis point to 4.43% (up 4bps). Ten-year Treasury yields dipped one basis point to 4.62% (up 5bps). Long bond yields declined a basis point to 4.85% (up 6bps). Benchmark Fannie Mae MBS yields slipped a basis point to 5.88% (up 3bps).
Italian 10-year yields added one basis point to 3.66% (up 13bps y-t-d). Greek 10-year yields jumped 11 bps to 3.42% (up 20bps). Spain's 10-year yields increased a basis point to 3.19% (up 13bps). German bund yields added three bps to 2.57% (up 20bps). French yields declined one basis point to 3.30% (up 1bps). The French to German 10-year bond spread narrowed four to 72 bps. U.K. 10-year gilt yields declined three bps to 4.63% (up 6bps). U.K.'s FTSE equities index was unchanged (up 4.0% y-t-d).
Japan's Nikkei 225 Equities Index rallied 3.9% (up 0.1% y-t-d). Japanese 10-year "JGB" yields rose three bps to 1.23% (up 13bps y-t-d). France's CAC40 jumped 2.8% (up 7.4%). The German DAX equities index rose 2.4% (up 7.5%). Spain's IBEX 35 equities index added 0.6% (up 3.3%). Italy's FTSE MIB index slipped 0.2% (up 5.9%). EM equities were mixed. Brazil's Bovespa index was little changed (up 1.8%), while Mexico's Bolsa index rose 2.8% (up 3.7%). South Korea's Kospi increased 0.5% (up 5.7%). India's Sensex equities index declined 0.6% (down 3.0%). China's Shanghai Exchange Index increased 0.3% (down 3.0%). Turkey's Borsa Istanbul National 100 index gained 1.3% (up 2.8%).
Federal Reserve Credit declined $17.8 billion last week to $6.788 TN. Fed Credit was down $2.101 TN from the June 22, 2022, peak. Over the past 280 weeks, Fed Credit expanded $3.062 TN, or 82%. Fed Credit inflated $3.977 TN, or 142%, over the past 637 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt recovered $18.4 billion last week to $3.259 TN. "Custody holdings" were down $98.4 billion y-o-y, or 2.9%.
Total money market fund assets jumped $41.7 billion to $6.903 TN. Money funds were up $769 billion over 26 weeks (25% annualized) and $942 billion y-o-y (16%).
Total Commercial Paper gained $11.7 billion to $1.157 TN. CP was down $94 billion, or 7.5%, over the past year.
Freddie Mac 30-year fixed mortgage rates fell eight bps this week to 6.96% (up 27bps y-o-y). Fifteen-year rates dropped 11 bps to 6.16% (up 20bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down a basis point to 7.13% (up 11bps).
Currency Watch:
For the week, the U.S. Dollar Index dropped 1.7% to 107.443 (down 1.0% y-t-d). For the week on the upside, the Brazilian real increased 2.8%, the British pound 2.6%, the Mexican peso 2.6%, the Swedish krona 2.5%, the Norwegian krone 2.3%, the New Zealand dollar 2.2%, the euro 2.2%, the Australian dollar 2.0%, the South Korean won 1.9%, the Singapore dollar 1.7%, the Swiss franc 1.0%, the Canadian dollar 1.0%, and the Japanese yen 0.2%. The Chinese (onshore) renminbi rallied 1.16% versus the dollar (up 0.8% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index slipped 0.3% (up 4.7% y-t-d). Spot Gold jumped 2.5% to $2,771 (up 5.6%). Silver added 0.7% to $30.585 (up 5.8%). WTI crude dropped $3.22, or 4.1%, to $74.66 (up 4%). Gasoline dropped 3.0% (up 1%), while Natural Gas gained 2.0% to $4.027 (up 12%). Copper fell 1.1% (up 7%). Wheat rose 1.0% (down 1%), and Corn added 0.5% (up 6%). Bitcoin added $170 or 0.2%, to $104,500 (up 11.5%).
Trump Administration Watch:
January 19 – Yahoo Finance (Rick Newman): “Donald Trump is used to managing debt. But not like this. As a real estate developer, Trump relied heavily on borrowed money to fund projects. Trouble paying back his debts contributed to six business bankruptcies. Trump battled back by writing off some loans, refinancing others, finding new lenders, and changing his business model. The public debt Trump will inherit as the 47th president is a completely different problem. The national debt will exceed $36 trillion when he takes office on Jan. 20, up from $20 trillion when he started his first term in 2017. As a percentage of GDP, debt held by the public has jumped from 75% in 2017 to 96% today. These numbers will only get worse… The main question is when markets will start punishing Uncle Sam for profligate borrowing…”
January 21 – Yahoo Finance (Ben Werschkul): “Donald Trump’s first day in office featured a flurry of executive moves he was able to dramatically sign with a stroke of the pen. High atop his agenda for the second day is a topic that won’t be quite so simple: the debt ceiling. In fact, Trump is deeply unhappy the issue is on the table at all. The newly inaugurated president is set for a meeting with congressional leaders Tuesday afternoon to, in part, hash out a strategy for maintaining US creditworthiness and the government's ability to service the $36 trillion debt. It’s an issue with a range of political landmines and one Trump can't ignore.”
January 22 – New York Times (Andrew Duehren): “When House Republicans gathered behind closed doors on Capitol Hill last week to hash out their plans for cutting taxes, Representative David Schweikert, an Arizona Republican, sounded a note of caution. The United States’ fiscal problems were at risk of spiraling out of control, Mr. Schweikert told his colleagues. He warned that investors on Wall Street were starting to think twice about lending to the United States, a potential loss of confidence in Washington’s tax and spending plans that could ripple across the economy. ‘This ain’t a game,’ Mr. Schweikert, a member of the House Ways and Means Committee, said... ‘This needs to temper both how we approach policy and how we communicate that policy.’”
January 21 – New York Times (Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Edmund Lee): “In a stark display of money and power, the three wealthiest men on the planet lined up on Monday in the Capitol Rotunda to witness Donald Trump being sworn in as the 47th president. The message was clear: With a president in office who wants to be known as a deal maker, Washington is open for business. The three men, Elon Musk, Jeff Bezos and Mark Zuckerberg, collectively worth close to a trillion dollars, were seated in front of Trump’s cabinet picks and behind his family, creating what might be a hierarchy of influence. The visuals spoke volumes… The inauguration… was a marked contrast to Trump’s first presidential run, when tech titans (and other business leaders) largely ignored him and only reluctantly showed up to a summit after he won the White House.”
January 22 – Bloomberg (Nancy Cook and Nacha Cattan): “House Republicans are in talks over raising the cap for state and local tax deductions after winning pledges from President Donald Trump and congressional leaders to include the measure in a must-pass tax bill this year. New York Republicans are having discussions about how to raise the $10,000 SALT cap so that their constituents can deduct more local income and real estate taxes from federal bills. Lawmakers are hoping to come up with a figure for the deduction cap in the coming weeks… GOP Representative Nicole Malliotakis said. ‘We looked at increasing the deduction, perhaps putting in some income restrictions so it’s not going to billionaires. We talked about possibly the marriage penalty. We talked about if second properties would be allowed for deduction,’ Malliotakis said. She said increasing the SALT cap to $20,000 would not be enough.”
January 21 – CNBC (Lora Kolodny): “President Donald Trump said… that he’d consider the possibility of Tesla CEO Elon Musk or Oracle Chairman Larry Ellison purchasing TikTok. At a press briefing to announce a joint venture for investing in artificial intelligence infrastructure, Trump was asked by a reporter if he was open to ‘Elon buying TikTok.’ ‘I would be if he wanted to buy it, yes,’ Trump said in response. ‘I’d like Larry to buy it, too.’”
January 21 – Financial Times (Claire Jones, Aime Williams, Jude Webber in Dublin, Peter Foster, Andy Bounds and Emma Agyemang): “Donald Trump has threatened to double tax rates for foreign nationals and companies in the US to hit back at ‘discriminatory’ levies on American multinationals, in a move that threatens to trigger a global confrontation over tax regimes. In a memo outlining his ‘America First’ trade policy on Monday, the US president referred to an obscure 90-year-old provision of the US tax code — Section 891 — that empowers him to retaliate against foreign countries by imposing punitive taxes on their citizens and businesses in America… His order… specifically asks the Treasury secretary to ‘investigate whether any foreign country subjects US citizens or corporations to discriminatory or extraterritorial taxes’ so it conforms with Section 891. This section says that when a president formally declares there is such discrimination, the tax rates should ‘be doubled in the case of each citizen and corporation of such foreign country” — without needing Congressional approval.’”
January 23 – CNBC (Jeff Cox): “President Donald Trump lobbed his first volley at the Federal Reserve, saying… that he will apply pressure to bring down interest rates… ‘I’ll demand that interest rates drop immediately,’ Trump said. ‘And likewise, they should be dropping all over the world. Interest rates should follow us all over.’ The comments represented an initial strike at Fed officials, with whom he had a highly contentious relationship during his first term in office.”
January 23 – Associated Press (Zeke Miller, Josh Boak and Jamey Keaten): “President Donald Trump used an address… to the World Economic Forum to promise global elites lower taxes if they bring manufacturing to the U.S. and threatened to impose tariffs if they don’t. Speaking by video… to the annual summit in Davos, Switzerland…, Trump ran through his flurry of executive actions since his swearing-in and claimed that he had a ‘massive mandate’ from the American people to bring change. He laid out a carrot-and-stick approach for private investment in the U.S. ‘Come make your product in America and we will give you among the lowest taxes as any nation on earth… But if you don’t make your product in America, which is your prerogative, then very simply, you will have to pay a tariff — differing amounts — but a tariff, which will direct hundreds of billions of dollars and even trillions of dollars into our treasury to strengthen our economy and pay down debt under the Trump administration.’”
January 23 – Associated Press (Jon Gambrell): “Saudi Arabia’s crown prince said… the kingdom wants to invest $600 billion in the United States over the next four years, comments that came after President Donald Trump earlier put a price tag on returning to the kingdom as his first foreign trip. Trump’s 2017 trip to Saudi Arabia upended a tradition of U.S. presidents first heading to the United Kingdom as their first trip abroad. It also underscored his administration’s close ties to the rulers of the oil-rich Gulf states as his eponymous real estate company has pursued deals across the region as well.”
January 20 – Financial Times (Aime Williams and Myles McCormick): “US President Donald Trump has said he will withdraw the US from the historic Paris climate agreement, dealing a blow to worldwide efforts to slow global warming following the hottest year on record. The decision was announced… among a flurry of pro-fossil fuel policies after Trump took the oath of office with a promise to ‘drill, baby, drill’ in pursuit of what he called ‘American energy dominance’. ‘The president will unleash American energy by ending Biden’s policies of climate extremism,’ the White House said. The US’s exit from the 2015 Paris accord, which was signed by almost 200 countries, means the world’s largest historical polluter will again walk away from its commitment to curb greenhouse gas emissions.”
January 22 – Bloomberg (Skylar Woodhouse and Hadriana Lowenkron): “President Donald Trump proposed turning disaster assistance over to individual states to distribute rather than having the Federal Emergency Management Agency respond, ahead of a trip to survey flood damage in North Carolina and wildfires in California. ‘All it does is complicate everything,’ Trump said in an interview with Fox News... ‘FEMA has not done their job for the last four years.’ Trump added that he would ‘rather see the states take care of their own problems’ and that ‘the federal government can help them out with the money.’”
January 24 – Associated Press (Linley Sanders): “Americans see the federal government as rife with corruption, inefficiency and red tape — but they’re less sure about whether Elon Musk is the right person to fix it. A new poll from The Associated Press-NORC Center for Public Affairs Research shows that only about 3 in 10 U.S. adults strongly or somewhat approve of President Trump’s creation of an advisory body on government efficiency, which Musk is helming. About 4 in 10 disapprove, while the rest were neutral or didn’t know enough to say.”
Trade War Watch:
January 22 – Bloomberg (Josh Wingrove and Hadriana Lowenkron): “President Donald Trump widened his tariff threats to include China and the European Union on his second day back in office after day one saw Canada and Mexico in his sights. ‘We’re talking about a tariff of 10% on China, based on the fact that they’re sending fentanyl to Mexico and Canada,’ Trump said… Tuesday, specifying Feb. 1 as a possible date. ‘Other countries are big abusers also, you know it’s not just China,’ Trump said. ‘We have a $350 billion deficit with the European Union. They treat us very very badly, so they’re going to be in for tariffs.’”
January 22 – New York Times (Ana Swanson): “When President Trump refrained from immediately imposing new tariffs on his first day in office, as he had previously threatened, business executives and others who support international trade breathed a sigh of relief. That relief has been short-lived. On Monday night, just hours after his inauguration speech, Mr. Trump said he planned to put a 25% tariff on products from Canada and Mexico by Feb. 1, claiming the countries were allowing ‘mass numbers of people and fentanyl’ to come to the United States. On Tuesday evening, Mr. Trump expanded the threat and said he also intends to put an additional 10% tariff on Chinese products by the same date, saying China was sending fentanyl to Mexico and Canada. The statements leave just 10 days before significant levies would go into effect on the United States’ three largest trading partners…”
January 22 – Reuters (Juveria Tabassum): “As U.S. President Donald Trump mulls imposing 25% duties on imports from Canada and Mexico on Feb. 1, focus has shifted to the sectors likely to bear the brunt of the tariffs. About 28%, or about $844 billion, of all U.S. imports in 2024 came from the two neighboring countries… The automobile industry accounted for imports of more than $202 billion from Canada and Mexico combined.”
January 22 – New York Times (Ana Swanson): “The Trump administration intends to push to renegotiate the U.S. trade deal with Canada and Mexico ahead of a required 2026 review of it, seeking to shore up U.S. auto jobs and counter Chinese firms that are making inroads into the Mexican auto sector, people familiar… said. The U.S.-Mexico-Canada Agreement, which Mr. Trump signed in 2020, required the three countries to hold a ‘joint review’ of the deal after six years, on July 1, 2026. But Mr. Trump intends to begin those negotiations sooner…”
January 21 – Associated Press (Rob Gillies): “Canada’s outgoing prime minister and the leader of the country’s oil rich province of Alberta are both confident Canada can avoid the 25% tariffs President Donald Trump says he will impose on Feb. 1. Justin Trudeau and Danielle Smith will argue that Canada is the energy super power that has the oil and critical minerals that America needs to feed what Trump vows will be a booming U.S. economy. But Doug Ford, the premier of Ontario, the manufacturing and automobile hub of Canada, said a trade war is 100% coming. Trump ‘declared an economic war on Canada,’ Ford said… ‘And we are going to use every tool in our tool box to defend our economy.’”
January 21 – Wall Street Journal (Paul Vieira): “Canadian Prime Minister Justin Trudeau warned President Trump that his renewed pledge to impose a 25% tariff on all Canadian imports, starting as early as Feb. 1, risks derailing his effort to usher in a ‘golden age’ for America, given the close trading ties between the neighboring countries. Trudeau reiterated… his willingness to retaliate forcefully against U.S. tariffs… and to provide financial support to households and businesses to deal with the consequences from a trade row. ‘Our focus is remaining calm, remaining strong and responding as necessary to actions by the U.S.,’ he told reporters... ‘Our response will be robust, and rapid, and measured, and very strong.’”
January 21 – Bloomberg (Julian Lee): “Russia’s seaborne crude exports saw their biggest drop since November last week after outgoing US President Joe Biden imposed sweeping sanctions on the country’s oil trade, with early signs that the measures are reshaping flows. The slump kept the less volatile four-week average below 3 million barrels a day for a fourth week and close to a recent 16-month low…”
January 21 – Bloomberg (Rebecca Choong Wilkins and Josh Xiao): “Chinese Vice Premier Ding Xuexiang said China will expand its imports, hours after US President Donald Trump left the economy out of countries he’s looking to hit with tariffs imminently. ‘We don’t seek trade surplus. We want to import more competitive, quality products and services to promote balanced trade,’ Ding said…”
LA Wildfire Watch:
January 18 – Bloomberg (Patrick Sisson): “Even as firefighters still struggle to contain the historic wildfires that destroyed thousands of homes in Los Angeles over the past week, questions are swirling about how the city can address a now even-more-dire housing shortage — and how the fires will intersect with the region’s ongoing affordability challenges. More than 12,000 structures — most of them single-family homes — have been destroyed or heavily damaged… ‘This tragedy of the wildfires and the mass displacement that it has caused is going to hugely exacerbate the existing crisis, which points to even more need to expedite housing production,’ said Scott Epstein, director of policy and research for Abundant Housing LA.”
January 18 – Financial Times (Guy Chazan and Christopher Grimes): “For the past 70 years, Fox’s Restaurant served pancakes, pork loin and catfish to the people of Altadena in Los Angeles County. That was until last week’s devastating wildfire reduced it to a charred wreck, sparing only the diner’s roadside sign. Paul Rosenbluh, Fox’s owner, now wonders whether there’s any point in staying around to rebuild. ‘You can only live in a disaster zone for so long,’ he says. ‘At one point you say, ‘I just don’t want to deal with this shit any more.’’Tens of thousands of others across Los Angeles are facing the same dilemma…”
Ukraine War Watch:
January 22 – Axios (Ivana Saric): “President Trump threatened on Wednesday to levy fresh tariffs on Russia if the Kremlin does not quickly agree to a deal to end its war in Ukraine… Trump made ending Russia’s invasion of Ukraine a key campaign pledge, but it’s not clear that his new threat will put significant pressure on Russia to change its negotiating posture. Trump wrote on Truth Social… that if a deal to end the war is not reached ‘soon,’ he would have ‘no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries.’ Trump said he wasn’t ‘looking to hurt Russia’ but that the actions were necessary to end the war. ‘I'm going to do Russia, whose Economy is failing, and President Putin, a very big FAVOR,’ he added.”
January 22 – Politico (Veronika Melkozerova): “The Kremlin is not impressed by United States President Donald Trump’s threat to impose new sanctions against Russia if it does not agree to strike a peace deal with Ukraine. ‘We do not see any particular new elements here,’ Kremlin spokesperson Dmitry Peskov told Russian media... Peskov added that Trump ‘liked sanctions’ and used them often during his first presidential term. ‘Russia is ready for an equal and careful dialogue with the United States, which we had during Trump’s first term,’ Peskov said… ‘We are waiting for signals that have not yet been received.’”
Market Instability Watch:
January 21 – Bloomberg (Editorial Board): “Since the start of the new year, the bond market has been urging Congress to come to terms with America’s spiraling budget problems. Soon it might be demanding immediate action. Long-term yields have hovered around 5%. If they stay there, the government’s inflation-adjusted cost of borrowing will likely exceed the economy’s rate of growth — meaning the debt ratio will rise even faster than currently projected and that bigger spending cuts or tax increases will be needed to rein it in. This is what ‘unsustainable’ fiscal policy looks like. Lawmakers haven’t even started talking about this problem, much less grappling with it realistically.”
January 22 – Financial Times (Valentina Romei): “The UK government borrowed far more than expected in December, underlining the scale of the challenge facing chancellor Rachel Reeves as she battles to restore confidence in her fiscal plans and turn around a stagnating economy. Borrowing… was £17.8bn last month, £10.1bn more than in December 2023, and the third highest in any December on record… In the first nine months of the fiscal year borrowing was £129.9bn, which was £8.9bn more than in the same period in the previous fiscal year, and the second-highest for the April to December period since… records began in January 1993.”
January 20 – Financial Times (Ian Smith): “Ray Dalio, the billionaire founder of hedge fund firm Bridgewater Associates, has warned that the UK could be heading for a ‘debt death spiral’, in which it has to borrow more and more money to service its rising interest costs. Dalio told the Financial Times… the market was struggling to absorb the UK’s higher borrowing needs since last October’s Budget. The combination of rising annual interest payments, which have already topped £100bn a year, and the need to roll over debt at higher borrowing costs, created the risk of a self-reinforcing cycle, he said. This ‘looks like a debt death spiral in the making because it will either require more borrowing to service the debt that will have to be serviced, squeeze out other spending, or require more taxes’, said Dalio…”
Global Credit and Financial Bubble Watch:
January 21 – Bloomberg (Olivia Fishlow): “Private credit and insurers are expected to get even closer this year, potentially prompting regulators to inspect ties between the two and any associated risk, according to a Moody’s… report. The ratings firm expects to see more insurers flock to private credit investments, as they continue to search for yield, particularly through asset-based finance opportunities, according to the Tuesday report. Areas of interest include consumer finance, commercial finance, hard assets and financial assets. Private credit funds are also anticipated to look to more retail investor opportunities, according to Moody’s…”
January 23 – Bloomberg (Ellen Schneider, Olivia Fishlow and Carmen Arroyo): “Private credit lenders are flocking to finance large, fast-growing technology companies gearing up to go public… This week, Blackstone Inc. led a private loan of just under $4 billion for Clario, a drug-trial software company looking to go public this year. And earlier this month, a group of lenders including Blackstone, Apollo Global Management Inc. and Blue Owl Capital Inc. inked a $2.75 billion term loan for Databricks Inc., one of the most valuable private software companies in the U.S…. Direct lenders are landing such deals in part because some of these fast-growing tech firms are not making money yet.”
January 22 – Bloomberg (Claire Ruckin, Abhinav Ramnarayan and Jeannine Amodeo): “Booming credit markets are throwing private equity firms a lifeline as they strive to return cash to investors: Instead of relying on the IPO market, they can pile portfolio companies with more debt and give themselves a payout. Dividend recapitalizations, where a firm borrows money for a payout to its owners, are an increasingly popular alternative to the usual dual-track options of listing or selling portfolio companies… The strategy has been used in recent deals… and red-hot demand for corporate bonds and loans means more are likely to follow, bankers said. ‘If they are keen to retain the investment, they can extract money by releveraging the structure and do some exceptional dividends,’ said Alexis Foret, a high yield portfolio manager at Edmond de Rothschild Asset Management... ‘Markets allow for that at the moment.’”
January 21 – Bloomberg (Andrew Kostic): “There are at least 21 lender calls scheduled for Tuesday in the US leveraged loan market as activity this holiday-shortened week began with a flurry. The biggest launch this morning was Athenahealth’s $6 billion Repricing… This year already opened with two $50 billion weeks of launches. Six of the eight all time for the market have occurred in the past two months…”
AI Bubble Watch:
January 21 – Wall Street Journal (Deepa Seetharaman and Tom Dotan): “Some of the world’s most prominent names in technology are pledging to pour as much as half a trillion dollars into building artificial-intelligence infrastructure in the U.S., in the latest high-profile initiative timed with the start of the Trump administration. The joint venture, known as Stargate, is led by the ChatGPT maker OpenAI and the global tech investor SoftBank Group. It will build data centers for OpenAI. The database company Oracle and MGX, an investor backed by the United Arab Emirates, are also equity partners in the venture. The companies are committing $100 billion to the venture and plan to invest up to $500 billion over the next four years. The plans… were announced… at a White House ceremony with President Trump.”
January 22 – Bloomberg (Justin Sink): “Elon Musk openly questioned whether companies that joined President Donald Trump’s announcement promising hundreds of billions of dollars in artificial intelligence infrastructure could follow through on their promises, exposing an early internal rift within the White House. ‘They don’t actually have the money,’ Musk wrote… ‘SoftBank has well under $10B secured. I have that on good authority.’ Trump was joined by SoftBank Group Corp.’s Masayoshi Son, OpenAI’s Sam Altman and Oracle Corp.’s Larry Ellison at the White House to announce the venture, dubbed Stargate, which they said would deploy $100 billion immediately with the goal of eventually spending $500 billion for the construction of data centers and physical campuses. ‘This is to me a very big thing,’ Trump said. ‘I think it’s going to be something that’s very special.’”
January 22 – Financial Times (George Hammond and Myles McCormick): “OpenAI and Microsoft have hit back at Elon Musk’s criticism of Stargate, the new $500bn artificial intelligence infrastructure project hailed by Donald Trump as a ‘resounding declaration of confidence in America’s potential under a new president’. In a rare break with Trump, Musk… poured cold water on the project, writing: ‘They don’t actually have the money.’ He added that he had it ‘on good authority’ that SoftBank had secured less than $10bn. OpenAI’s chief executive Sam Altman responded… that Musk’s claim was ‘wrong, as you surely know’. ‘I realise what is great for the country isn’t always what’s optimal for your companies, but in your new role i hope you’ll mostly put [the US] first,’ he wrote.”
January 24 – Bloomberg (Dana Wollman): “Meta Platforms Inc. plans to invest as much as $65 billion on projects related to artificial intelligence in 2025, including building a giant new datacenter and increasing hiring in AI teams, Chief Executive Officer Mark Zuckerberg said… The company plans to use the funds to build a datacenter ‘so large that it would cover a significant part of Manhattan,’ Zuckerberg said… ‘This is a massive effort, and over the coming years it will drive our core products and business, unlock historic innovation, and extend American technology leadership,’ Zuckerberg wrote… Analysts were expecting capital expenditures of $51.3 billion in 2025…”
January 22 – Wall Street Journal (Lauren Thomas): “Santee Cooper, the big power provider in South Carolina, has tapped financial advisers to look for buyers that can restart construction on a pair of nuclear reactors that were mothballed years ago. The state-owned utility is betting interest will be strong, with tech giants such as Amazon.com and Microsoft in need of clean energy to fuel data centers for artificial-intelligence capabilities… Construction of two nuclear reactors at the V.C. Summer plant was halted in 2017 after Santee Cooper and the plant’s then-co-owner, South Carolina Electric & Gas—now part of Dominion Energy—had already jointly spent around $9 billion.”
Bubble and Mania Watch:
January 22 – Bloomberg (Hannah Levitt): “JPMorgan… dealmakers are spending their time in the Swiss Alps huddling with ebullient clients, but the boss of the biggest US bank is striking a more cautious tone. ‘Asset prices are kind of inflated’ in the US stock market, Chief Executive Officer Jamie Dimon said… from the World Economic Forum… ‘You need fairly good outcomes to justify those prices, and we’re all hoping for that. I think having pro-growth strategies helps make that happen, but there are negatives out there and they can tend to surprise you.’”
January 24 – Bloomberg (Esha Dey): “Shares of US companies roared to a record this week, seemingly shrugging off worries about tariffs, immigration and inflation. Yet, company executives are doing something decidedly less bullish… A gauge of insider sentiment that tallies the number of buyers versus sellers shows there were just 98 companies where at least one insider purchased the company’s shares this month through Jan. 22, compared with 447 at which at least one insider sold, according to… the Washington Service. With a little over a week of trading left in January, that buy-sell ratio, at 0.22, is currently on track to be the lowest in data going back to 1988.”
January 22 – Bloomberg (Lionel Laurent): “As a European who doesn’t own Bitcoin, I enjoy a bit of schadenfreude when the cryptocurrency industry is really upset about something. And the latest bout of outrage is a doozy: The virtual-currency elites who saw Donald Trump as a crypto savior are now upset over his recent multi-billion-dollar Trump-branded meme coin sale. Investor Ari Paul called it ‘fleecing people for billions’; former Trump associate Anthony Scaramucci said it was dictator-level ‘corruption’; ex-Coinbase Global Inc. executive Balaji Srinavasan called it a ‘lottery’ with no wealth creation. Of course, they’re right to take a dim view of the Trump meme coin’s blend of naked cash-grab, MAGA cultism and pump-and-dump tokenomics.”
January 22 – Bloomberg (Lu Wang and Vildana Hajric): “The ETF industry’s upstart-in-chief is back with another roll of the new-product dice — this time betting on a game-changing expansion of Wall Street’s zero-day options boom. Matt Tuttle, who struck gold with leveraged meme-stock funds but fell flat with his Jim Cramer ETFs, has filed to create a line of new offerings that will trade fast-twitch derivatives on popular companies beloved by the retail-investing masses. Think Nvidia Corp., Tesla Inc., MicroStrategy Inc. and more.”
January 23 – Financial Times (Ian Smith and George Steer): “US equities have soared to their most expensive level relative to government bonds in a generation… A record-breaking run for US equities… has pushed the so-called forward earnings yield — expected profits as a percentage of stock prices — on the S&P 500 index down to 3.9%... A sell-off in Treasuries has driven 10-year bond yields up to 4.65%. That means the difference between the two, a measure of the so-called equity risk premium, or the extra compensation to an investor for the risk of owning stocks, has fallen into negative territory and reached a level last seen in 2002 during the dotcom boom and bust.”
January 24 – Bloomberg (Katherine Doherty): “Here’s a surprising new fact about the world’s largest and most-liquid public equity market: Most of the activity on it isn’t public anymore. For the first time on record, the majority of all trading in US stocks is now consistently occurring outside the country’s exchanges… This off-exchange activity — which happens internally at major firms or in alternative platforms known as dark pools — is on course to account for a record 51.8% of traded volume in January.”
U.S./Russia/China/Europe Watch:
January 21 – Wall Street Journal (Matthew Luxmoore): “One day after President Trump pledged at his inauguration to be a ‘peacemaker and unifier,’ the U.S.’s two most powerful adversaries agreed to work more closely on overhauling a world order they see as orbiting around the West… Russian President Vladimir Putin and Chinese leader Xi Jinping promised to work hand-in-hand, in what could prove to be the first indication of a new phase in their deepening confrontation with Washington. Neither side mentioned the U.S. president… But with global attention focused on Trump’s return to office and the flurry of executive orders he has signed, Beijing and Moscow made clear they are still reading from the same page… The Kremlin ensured nobody missed the point. In an unusual move, it published footage from the conversation on its website, showing Putin and Xi exchanging cordial greetings, calling each other ‘dear friend,’ and issuing brief statements about their growing ties…”
January 22 – Bloomberg (Yoshiaki Nohara): “Japanese Foreign Minister Takeshi Iwaya said he and US Secretary of State Marco Rubio agreed to bring their countries’ ties to new heights in their first meeting. Earlier in the week, Iwaya became the first Japanese foreign minister to attend a US presidential inauguration ceremony… A spokesperson for Rubio said the ministers ‘discussed plans to deepen ties during the Trump Administration, and how the US and Japan can work together to counter ongoing threats in the Indo-Pacific and around the world, including joint efforts against China’s destabilizing actions.’”
January 23 – Bloomberg (Cliff Venzon and Andreo Calonzo): “Secretary of State Marco Rubio sparked a sharp rebuke from Beijing over his comments on the South China Sea in one of his first foreign policy statements since taking office. Rubio criticized China’s ‘dangerous and destabilizing’ actions in the South China Sea, a regional flashpoint, while reaffirming defense ties with US allies in Asia. The foreign ministry in Beijing pushed back, saying that the US has ‘no right to interfere’ in the matter. Rubio… reaffirmed Washington’s ‘ironclad’ commitment to defend Manila in a call with Philippine Foreign Affairs Secretary Enrique Manalo… Trump’s top diplomat separately spoke with Indonesian Foreign Minister Sugiono and exchanged views on maritime security in the South China Sea…”
January 17 – Financial Times (Charles Clover, Bita Ghaffari, and Anastasia Stognei): “Iran and Russia have agreed to closer military co-operation and intelligence sharing in a sign of the extent to which the two countries have been driven together by confrontation with the west. President Vladimir Putin and his counterpart Masoud Pezeshkian signed the wide-ranging ‘comprehensive strategic partnership treaty’ in Moscow… The long-anticipated partnership… stopped short of the pledge of mutual military assistance that Putin signed with North Korea in June. But Russia and Iran pledged to work together against common military threats…”
January 22 – Financial Times (Demetri Sevastopulo and Kathrin Hille): “Two Iranian cargo vessels carrying a crucial chemical ingredient for missile propellant will sail from China to Iran over the next few weeks, according to intelligence from… two western countries. The Iranian-flagged ships — the Golbon and the Jairan — are expected to carry more than 1,000 tonnes of sodium perchlorate, which is used to make ammonium perchlorate, the main ingredient for solid propellant for missiles. Two of the officials said the sodium perchlorate could produce 960 tonnes of ammonium perchlorate, which makes up 70% of the propellant for solid-fuel missiles.”
De-globalization Watch:
January 20 – Bloomberg (Vlad Savov): “Sales of Apple Inc. iPhones dived 18.2% in China during the December quarter…, a major setback for the company in its biggest market after the US. The company’s flagship handsets, China’s top sellers a year earlier, relinquished the top spot to Huawei Technologies…”
January 23 – Financial Times (Joe Leahy): “A record number of US companies in China are thinking about moving some operations out of the country or are already in the process of doing so, according to a new study… The annual survey by the American Chamber of Commerce in China found 30% of respondents were exploring alternative sources for goods and relocating manufacturing out of the country last year, or had already done so — double the percentage in 2020.”
Inflation Watch:
January 19 – Wall Street Journal (Paul Kiernan and Anthony DeBarros): “Economists are starting to model the effects of President-elect Donald Trump’s plans to raise tariffs, cut taxes and restrict immigration. The upshot: Inflation and interest rates are likely to be higher for at least the next two years than forecasters anticipated before the election. The consumer-price index is now expected to rise 2.7% in December 2025 from a year earlier, according to the average forecast of 73 economists… In October, the panel saw consumer prices rising 2.3% in 2025. ‘Risks to inflation and interest rates are to the upside with a Trump administration,’ said Augustine Faucher, chief economist at PNC Financial Services Group.”
January 19 – Wall Street Journal (Patrick Thomas and Jesse Newman): “The specter of rising food prices is back. The cost of groceries in the U.S. increased 1.8% from a year earlier in December, rising at the fastest pace in more than a year… There isn’t one factor. Bird flu is killing chickens, cutting egg supplies and sending wholesale prices to a record. Extreme heat and dry weather in the world’s coffee-growing regions have sent the cost of brews surging. Chocolate and cereal makers have raised prices for their products, too.”
January 18 – Associated Press: “Base rates for North Carolina homeowners’ insurance premiums will increase on average by about 15% by mid-2026 as part of a settlement reached by the state Insurance Department and the industry. The agreement… contrasts with the January 2024 request by the North Carolina Rate Bureau, which represents insurance companies, seeking a 42.2% overall average increase.”
January 20 – Bloomberg (Weilun Soon): “The cost to hire an oil supertanker on key routes to China has doubled since the US imposed sanctions on Russia, showing the extent to which the move has upended the global shipping market… Daily rates for very-large crude carriers on the Middle East-to-China route surged 112% to $57,589 in the week through Friday, according to Baltic Exchange data, after Washington sanctioned nearly 160 tankers hauling Russian crude on Jan. 10. Those on the US Gulf-to-China journey jumped 102%, while West Africa-to-China saw an increase of 90%.”
January 22 – Bloomberg (Silla Brush): “BlackRock Inc. Chief Executive Officer Larry Fink said investors are too quick to conclude that high inflation is over, raising the prospect that bond yields will rise along with steeper prices. ‘The biggest risk we have worldwide today is the world believes we are past the high point of inflation,’ Fink told Bloomberg…, noting that his view conflicts with what market forces are saying. ‘I could truly see a scenario where we are going to have elevated inflation.’”
Federal Reserve Watch:
January 19 – Bloomberg (Liz Capo McCormick and Ye Xie): “It’s at best, a longshot, but one that’s emerged among a group of die-hard bond traders — that the Federal Reserve’s next move on interest rates will be up, not down. The wager… stands in stark contrast to the consensus on Wall Street for at least one rate cut this year… Based on options linked to the Secured Overnight Financing Rate, traders currently see about a 25% chance that the Fed’s next move will be to lift rates by year end, according to… Bloomberg Intelligence…”
January 24 – Bloomberg (Leonard Kehnscherper): “The strength of the US economy is making BlackRock Inc. Chief Executive Officer Larry Fink wonder if the Federal Reserve may have to resort to increasing interest rates later after easing in the short term. ‘I am not calling for that,’ Fink commented… ‘I see probabilities’ of a rate hike at some point beyond the next 12 months or so, but he cautioned that such a scenario wasn’t his ‘core prognostication.’ ‘The economy is very strong… It was very strong in the fourth quarter and the evidence that we are hearing from different corporations is that business is strong already in the first quarter.’”
U.S. Economic Bubble Watch:
January 17 – Reuters (David Lawder): “The Congressional Budget Office… forecast a $1.865 trillion U.S. budget deficit for fiscal 2025, largely flat with last year… The CBO ‘baseline’ estimates are based on current laws and assume that Trump's 2017 individual tax cuts expire as scheduled at the end of this year, causing rates to snap back to higher levels. Efforts by Trump and Republicans in Congress to extend current individual and small business tax rates could add over $4 trillion to deficits over 10 years if not offset with savings elsewhere. Other tax breaks promised by Trump, such as exempting Social Security, tip and overtime income from taxation, could add more debt.”
January 21 – Financial Times (Simon Foy and Ortenca Aliaj): “US banks are ‘in the beginning of go-mode’ and ‘animal spirits are alive’, according to a senior JPMorgan… executive, as Wall Street bets that a lighter-touch regulatory regime under President Donald Trump will spur dealmaking in the world’s largest economy. Speaking at the World Economic Forum…, Mary Erdoes, asset and wealth management chief at the Wall Street lender, said it was ‘hopeful’ that Trump’s regulatory approach would boost the US economy, undoing some of the burden placed on the banking industry by Joe Biden’s administration.”
January 18 – Financial Times (Gregory Meyer and Stephen Gandel): “US consumers continued to open their wallets at the start of 2025 after a $1tn spending spree during the holiday season... Retailers rang up $994bn during the 2024 holiday season, with sales rising 4% year on year, the National Retail Federation said… Consumers spent $924bn in total on the debt and credit cards issued by Bank of America, Citigroup, JPMorgan Chase and Wells Fargo in the final three months of 2024. That was up 5% from the prior three months — the highest year-end increase in three years.”
January 22 – Bloomberg (Alex Tanzi): “Americans are rolling over an ever-larger share of their credit card debts even with interest rates near multi-decade highs, a sign of growing strain on consumer finances… Revolving card balances in the third quarter of last year surged to the highest level since at least 2012 when the series began… US consumers had revolving card balances of $645 billion with the large banks in the Philly Fed survey, up by more than 50% from a post-pandemic low in the second quarter of 2021. The delinquency rate has risen too, with some 3.5% of card balances past due by 30 or more days and 1.8% of accounts delinquent. Both figures are more than double the post-pandemic lows recorded in 2021. For about one-tenth of credit-card users, the utilization rate for their cards is close to 95%, meaning that any further spending is increasingly perilous.”
China Watch:
January 20 – Bloomberg (Foster Wong): “President Xi Jinping called for China to implement more proactive macroeconomic policies this year to maintain growth momentum as the world’s No. 2 economy could be facing new US tariffs. The Chinese leader said the country should seek progress while maintaining stability. He also reiterated his call to promote high-level scientific and technological self-reliance, the official Xinhua News Agency reported…”
January 23 – Financial Times (Cheng Leng): “China’s central bank has pumped a record amount of short-term funds into the financial system this week in an effort to pre-empt the cash crunch that usually accompanies the lunar new year holiday. Aimed at smoothing seasonal turbulence, the total cash injection of Rmb2.2tn ($300bn) through the 14-day reserve repo… comes as millions of residents prepare to travel home, settle tax bills and hand out cash-filled red envelopes.”
January 22 – Financial Times (Cheng Leng, Arjun Neil Alim, William Sandlund and Thomas Hale): “Chinese authorities have sought to boost the stock market and restore confidence in the world’s second-largest economy by telling local insurance companies and mutual funds to invest more in domestic stocks. Regulators have told state insurers to invest a minimum of 30% of their new policy premiums in local shares, while mutual funds have been told to increase these shareholdings by 10% annually for the next three years.”
January 19 – Bloomberg: “Chinese officials are taking steps to stabilize operations at China Vanke Co. after deepening liquidity stress and questions surrounding the whereabouts of its top executive triggered turmoil for its bonds and shares last week… Officials of Shenzhen… held a closed-door meeting to discuss Vanke on Friday… The Shenzhen government said during the meeting it plans to ensure that Vanke’s operations remain stable, the people added. The officials also plan to bring in new auditors and financial advisors to assess Vanke’s balance sheet and property projects to pave the way for next steps…”
January 21 – Bloomberg (Shirley Zhao): “China’s luxury market sales are estimated to have plunged as much as 20% in 2024, the steepest since at least 2011, as the country’s economic slowdown dents consumer confidence, according to… Bain & Co. The decline has brought the country’s luxury market size back to near the 2020 level…”Europe Watch:
January 20 – Bloomberg (Ethan Wang, Yukun Zhang and Ryan Woo): “The frugal trend that began in China during the economic disruption of the pandemic and deepened amid the crisis in the property market is intensifying as Gen Z shuns government calls to spend… On China's Instagram-like Xiaohongshu… many under-30s are swapping notes on how to spend less on office lunches and shop on the cheap. Influencers are also sharing tips on turning financial discipline into a lifestyle. Posts on how to save money total more than 1.5 million with more than 130 million views. ‘I feel that the economy is quite bad, and it seems like it’s hard for everyone to make money, so I think it’s important to protect my own wallet,’ said Ava Su…”
Central Bank Watch:
January 22 – Bloomberg (Mark Schroers, Jana Randow and Alexander Weber): “The European Central Bank isn’t lowering interest rates too slowly and will maintain its measured approach to easing monetary policy, President Christine Lagarde told CNBC. ‘We do not see ourselves behind the curve,’ Lagarde said… in Davos, where she’s attending the World Economic Forum. ‘We are on this sort of regular, gradual path.’”
Europe Watch:
January 24 – Bloomberg (Mark Schroers and Alexander Weber): “The euro area’s private sector grew in January after two months of contraction, surprising analysts as the embattled manufacturing sector showed small signs of improvement. S&P Global’s Composite Purchasing Managers’ Index rose to a five-month high of 50.2 from 49.6 the previous month…”
January 19 – Bloomberg (Iain Rogers): “Support for Germany’s conservative opposition fell below 30% for the first time since April in a new poll, though it maintained a wide lead over the far-right Alternative for Germany ahead of next month’s election. Friedrich Merz’s center-right CDU/CSU alliance was in first place with 29% backing in the latest Insa survey… The AfD also lost one point, to 21%, while support for Chancellor Olaf Scholz’s Social Democrats and the Greens was unchanged at 16% and 13%...”
Japan Watch:
January 23 – Associated Press (Yuri Kageyama): “The Bank of Japan raised its key interest rate to about 0.5% from 0.25% Friday, noting that inflation is holding at a desirable target level. ‘The economy is gradually recovering,’ BOJ Gov. Kazuo Ueda told reporters… He acknowledged uncertainties remain, including overseas inflation and foreign exchange fluctuations. But he reaffirmed his view that additional hikes will be needed if the economy remains stable. ‘Our basic thinking has not changed,’ he added, stressing the importance of ‘the positive cycle’ of higher prices and wages.”
January 23 – Reuters (Leika Kihara): “Japan’s core consumer prices rose 3.0% in December from a year earlier to mark the fastest annual pace in 16 months…, keeping alive market expectations that the central bank will keep raising ultra-low interest rates.”
January 22 – Bloomberg (Yoshiaki Nohara): “Japan’s trade surplus with the US last year far surpassed its average levels during President Donald Trump’s first term, risking his ire as the president mulls tariff plans across the world. Japan’s trade surplus with the US last year stood at ¥8.6 trillion ($54.9bn), the fifth largest on record… That’s significantly higher than the average of ¥6.7 trillion during 2017 and 2020…”
Emerging Markets Watch:
January 23 – Reuters (Marcela Ayres): “Investors already concerned about Brazil's ballooning public debt load under veteran leftist President Luiz Inacio Lula da Silva are being forced to reckon with an additional risk: a government debt profile with growing sensitivity to high interest rates. That’s because Latin America's largest economy finances an unusually high portion of its debt through floating-rate bonds crafted to appeal to investors during times of market stress…, leaving the debt with its worst composition in 20 years.”
January 24 – Bloomberg (Andrew Rosati): “Brazil’s annual inflation slowed less than expected in early January despite a drop in energy costs, highlighting the challenges facing policymakers as they prepare to raise the interest rate again next week… Consumer prices rose 4.5% from a year earlier, above the 4.36% median forecast…”
January 23 – Bloomberg (Beril Akman): “Turkey’s central bank cut its main interest rate for a second straight month and signaled similar cuts in future meetings by tweaking its guidance. The Monetary Policy Committee… lowered its one-week repo rate to 45% from 47.5%.”
January 19 – Reuters (Siddhi Nayak): “The stock prices of Indian private lenders that have reported an increase in bad loans in their personal loans and micro-credit businesses are bearing the brunt of investors’ fears of a U-turn in the asset-quality cycle for the country's banks. RBL Bank's shares fell as much as 5.8% on Monday after the lender reported a near 28% sequential jump in… loans… classified as non-performing for the first time.”
Leveraged Speculation Watch:
January 21 – Bloomberg (Nell Mackenzie): “Hedge fund industry lobbyists have sent a wish list to the U.S. Securities and Exchange Commission (SEC) asking for repeals and delays to much of the regulator's hard-hitting agenda on industry transparency. The Managed Fund Association (MFA) on Monday sent a letter to Mark Uyeda, President Donald Trump's pick as acting chair of the U.S. Securities and Exchange Commission, who will take on the role from Gary Gensler…”
January 18 – Wall Street Journal (Caitlin McCabe): “Hedge funds are having a moment… On average, hedge funds gained 10.7% after fees last year, according to PivotalPath... That was the best year since 2020, when they made 11.4% amid pandemic-fueled volatility. Before that, the last time the industry saw double-digit gains was 2013. Every strategy tracked by the research firm made money on average—unusual in an industry where multiple strategies typically falter in any given year.”
January 19 – Financial Times (Harriet Agnew): “Investors in hedge funds have paid out almost half of their profits in fees since the early days of the industry more than half a century ago… Managers generated $3.7tn of total gains before fees, but fees charged to investors were $1.8tn, or about 49% of gross gains, according to… LCH Investments, an investor in hedge funds… ‘Up to the year 2000, the hedge fund fee take had been running at around a third of overall gains, but since then it has increased to a half,’ said Rick Sopher, chief executive of Edmond de Rothschild Capital Holdings and chair of LCH Investments. ‘As returns came down, fees went up.’”
Social, Political, Environmental, Cybersecurity Instability Watch:
January 24 – Associated Press (Alex Veiga): “Economic losses from hurricanes and other natural disasters soared in the U.S. last year and were above average globally, reflecting another year of costly severe storms, floods and droughts. Damage caused by Hurricanes Helene and Milton helped push total economic losses from natural disasters in the U.S. to $217.8 billion last year, according to… Aon PLC. That figure represents an 85.3% increase from 2023… It’s also the largest annual tally of economic losses from natural disasters since 2017.”
January 20 – Bloomberg (Jennifer A. Dlouhy): “US President Donald Trump revoked offshore oil and gas leasing bans that effectively blocked drilling in most US coastal waters as he made sweeping moves his first hours in office to unleash American energy development. Trump’s move came as part of a broad assault on executive orders issued by former President Joe Biden, including revoking his recent decision to bar drilling rigs in some 625 million acres of coastal waters.”
January 22 – Bloomberg (Brian K. Sullivan and Naureen S. Malik): “A deep freeze is straining power supplies across the eastern US, sending demand on the country’s largest electric grid to an all-time winter high as the South digs out from one of the worst snow storms in 130 years. Electricity consumption on the PJM Interconnection LLC grid, which stretches from Washington to Illinois, reached 145 gigawatts, topping the winter record set in 2015. Power prices at PJM’s benchmark Western hub rose as high as $742.91 a megawatt-hour Wednesday morning, more than triple from the same time Tuesday…”
Geopolitical Watch:
January 22 – Reuters (Leela de Kretser): “Iran is ‘pressing the gas pedal’ on its enrichment of uranium to near weapons grade, U.N. nuclear watchdog chief Rafael Grossi said…, adding that Iran's recently announced acceleration in enrichment was starting to take effect. Grossi said last month that Iran had informed the International Atomic Energy Agency that it would ‘dramatically’ accelerate enrichment of uranium to up to 60% purity, closer to the roughly 90% of weapons grade… ‘Before it was (producing) more or less seven kilograms (of uranium enriched to up to 60%) per month, now it’s above 30 or more than that. So I think this is a clear indication of an acceleration. They are pressing the gas pedal,’ Grossi told reporters…”
