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I have to say, if I was looking to hire a construction worker, President Trump appeared so much bigger and stronger. But unless you have a screw loose, you go with the scrawny guy to oversee monetary policy (for the next 10 months).
Entertaining as it was, the extraordinary Trump and Powell construction-site encounter still lost the news cycle to The Return of Meme Stock Madness.
Bloomberg ran with simple: “Meme Stocks are Back.” Business Insider: “Historic Short Squeeze Drives Latest Meme Stock Rally, Goldman Sachs Says” and “Here’s ChatGPT’s Advice on How to Spot the Next Meme Stock.” CNBC: “Meme screen: Heavily shorted small stocks that are starting to rip this week.”
It’s worth noting that the Goldman Sachs Short Index rallied 71% from April 9th intraday lows to Thursday’s intraday highs.
Yahoo Finance: “Meme stock rally has investors feeling ‘invulnerable’ as speculative bets power markets at record highs.” The article quoted Interactive Brokers’ chief strategist Steve Sosnick: “I think more and more investors are feeling somewhat invulnerable right now. Everything they’ve been trying has been working for them. If the basic stuff’s working, why not try a bit more speculative stuff.”
Or a lot more.
MarketWatch: “‘I’m already up $45,000 in about an hour’ — Reddit traders boast about wins as meme-stock mania returns.” Bloomberg: “Five-Cent Meme Stock Makes us 15% of Trading on US Exchanges.” Bloomberg: “High-Risk Currency Trading Is the New Meme Stock for This Retail Crowd.” NYT: “The Stock Market’s Most Unserious Season Is Back and Dorkier Than Before.”
July 24 – New York Times (Rob Copeland and Kailyn Rhone): “The fever in financial markets over ‘meme stocks’ is back and stranger than ever. Just how strange? So strange that on Monday, for no singular reason, shares in a medley of beaten-down companies suddenly soared as small-time investors bought up stocks that mainstream Wall Street analysts and investors had long given up on. It got odder on Tuesday, as that tsunami of trading intensified and the shares of four companies briefly doubled in value. Krispy Kreme (DNUT), Opendoor (OPEN), Rocket Mortgage (RKT) and Kohl’s (KSS) had become the meme stocks of the moment, along with a new moniker from traders — ‘DORK,’ a reference to the first letters of their tickers.”
July 24 – Axios (Madison Mills): “Meme stocks are back, with GoPro, Opendoor and Krispy Kreme rallying double digits this week thanks to retail investors and Reddit threads. The retail resurgence is the latest signal that investors are willing to take on more risk, as stocks keep hitting record highs and it gets harder to beat the broader market. ‘The environment is just kind of ripe for it. We’re seeing it in crypto as well,’ Tom Bruni, editor in chief of Stocktwits… told Axios. The meme stock rally comes as other parts of the market, from the broader index to bitcoin, are also hitting record highs. The meme stock craze kicked off during the pandemic, when stimulus checks coupled with time at home to scroll through Reddit threads led to a retail trading boom. Amy Wu Silverman, an equity derivatives strategist at RBC, told Axios that moment represented a ‘sea change’ that hasn’t gone away, though there have been fits and starts of mania since 2020.”
Indeed, “a sea change that hasn’t gone away.” And it won’t go away until the bursting of a historic speculative Bubble inflicts painful – behavior changing – losses on the crazed masses of retail, institutional and professional speculators. There’s no cure for a Bubble. They feed off loose conditions – and won’t go quietly. Great care must be taken to ensure they don’t materialize. It is crucial to deflate Bubbles early, before they gain momentum and alter market, financial and economic structure.
July 24 – Bloomberg (Denitsa Tsekova and Carmen Reinicke): “It was once a symbol of rebellion against the well-heeled Wall Street establishment. Today, it’s just another day in markets. This week proved the point. Opendoor surged 43% in a single day. Krispy Kreme rallied 39% in a matter of hours. GoPro briefly spiked 73%. Reddit message boards lit up once again with rocket emojis and call-option bravado. Yet it wasn’t the magnitude of the surges that mattered — but the indifference they met. Customary warnings about speculative excess fell on deaf ears. What once felt seismic now feels like a normal part of daily trading — another episode in a US financial system where bursts of retail speculation are routine, expected, and largely unremarkable.”
Important perspective from the above Bloomberg article: “Peter Atwater, an adjunct professor at the College of William & Mary who studies retail investors, said the current wave of activity reflects a shift in both market sentiment and investment toolkit. Meme stocks trading, he says, has lost its sense of novelty — and that’s precisely the point. ‘We’ve normalized memeing,’ he said. ‘There’s a yawn to it now.’ In Atwater’s view, the most aggressive traders have already moved on to riskier frontiers – digital tokens, leveraged ETFs, prediction markets — while meme stocks have become more of a cultural rerun’… Contracts that expire within 24 hours made up a record 62% of the S&P 500’s total options so far this quarter…, with more than half of the activity being driven by retail trading.”
It might be somewhat less than obvious. We’re numb to it anyways. But Bubble excess has taken another fateful lurch to the great unknown.
We’re witnessing the consequences of decades of Bubble mismanagement – that these days has all the mesmerizing appearances of epic wealth creation and permanent prosperity. And at this point, risks associated with the bursting of such a monumental Bubble ensure the Fed doesn’t dare move to rein in excesses. Meanwhile, the administration is pulling out all the stops to stoke Bubble inflation (i.e., crypto, AI, deregulation, private markets…). President Trump is precisely why central bank independence from political pressure is so fundamental.
There was more than a little irony this week, with President Trump again demanding lower interest rates, despite conspicuous evidence of loose financial conditions and precarious market excess. Of course, candidates to replace Powell (Hassett, Warsh, Waller and Bessent) are all calling for rate cuts. But what is Mohamed El-Erian thinking? Not only has he called for a rate cut next week, he's also saying Powell should resign. Appeasement would set a dangerous precedent.
It's now been 10 months since the Fed commenced its 100 bps rate reduction. This policy error will surely escape future historians. The Federal Reserve aggressively loosened monetary policy during a period of loose financial conditions and intensifying market excess. Perhaps there’s an argument that overheated finance can be disregarded when an economy is in trouble. But that was clearly not the situation last fall. In their case to discredit the Federal Reserve, the administration today argues that politically motivated cuts were meant to bolster Biden/Harris.
There was more evidence this week suggesting loose financial conditions have growing potential to fuel upside surprises in economic activity and inflation. The preliminary July Services PMI Index jumped to a stronger-than-expected 55.2, the highest reading since last December. The Services Employment subcomponent posted its fifth straight gain to the strongest reading (52.6) since January. Prices were also higher. And more indications this week of reemerging labor market tightening. Initial Jobless Claims declined for the sixth straight week. At 217,000, claims are within a thousand of the lowest level back to early-February.
Last year’s argument was that the policy rate was significantly above the so-called “neutral rate.” This would be a problematic analytical framework even in a non-Bubble environment. Arguably, at this overheated Bubble phase – massive fiscal deficits, unprecedented leveraged speculation, booming equities markets, rapidly inflating “private-Credit” and crypto Bubbles - it would require a meaningfully higher policy rate to restrain financial excess. Aggressive risk takers – in the markets, throughout finance, within corporate America, and all around the economy – have achieved success. They now confidently dominate positions of power and influence. Risk aversion has been virtually eradicated.
In the stock market, the retail “buy the dip” crowd has never been so emboldened. Trading options is easy money. For free money, simply squeeze the lowly shorts. FOMO (fear of missing out) ensures portfolio managers fear cash holdings are their greatest risk. Meanwhile, with the exception of mortgage debt, the Credit system is firing on all cylinders.
July 21 – Bloomberg (Rachel Graf): “About $61 billion of US leveraged loans hit the market Monday, the second-most ever…, as junk-rated borrowers continue rushing to lower borrowing costs by repricing existing loans. There were 33 launches…, with all but six of them repricings. The largest was a $7.57 billion offering for medical supplies giant Medline, the bulk of which will be used to reprice a term loan.”
July 25 – Bloomberg (Gowri Gurumurthy): “US junk bonds are headed for their second week of gains after steadily rising for six straight sessions… The broad gains were… partly fueled by large cash inflows into US high yield funds in 11 of the past 12 weeks. The funds reported a cash haul of more than $900m for the week ended July 23… CCC yields, the riskiest tier of the junk bond market, dropped to a three-week low of 10.66% after steadily declining for four sessions. CCCs are on track to rack up their seventh week of gains, the longest streak since October… The market priced nearly $9bn in four sessions this week, making it the busiest week since mid-May. The month’s volume is $27.5b. This will be the busiest July since at least 2021.”
July 24 – The Bond Buyer (Jessica Lerner): “Fears about changes to the tax exemption, shifting macroeconomics, growing capital needs and inflation-induced added costs to complete projects… led state and local government issuers to bring debt at a record pace, with issuance already on track to break 2024’s record $500-plus billion. The volume currently stands at $310.166 billion, up 17.4% from $264.151 billion at the same time last year. Now that the second half is underway, several firms revisited their supply projections for the year…”
Give the bond market Credit for maintaining composure. It’s actually not all that atypical for bonds to disregard crazy stock market excess. While speculative equities markets turn quite short-term focused, bonds tend to hold a longer-term perspective. Bonds can watch stock market exuberance and crazy meme stock speculation, and take comfort that the end is nigh.
Global bond markets continue to appear vulnerable. European bonds, in particular, rallied Monday in what appeared a curious reaction to the Japanese election (unwind of hedges?). But yields were back up by the end of the week. German 10-year bund yields, at 2.72%, closed the week a basis point from the high since the end of March. But it’s the Japanese bond market that deserves special focus.
July 23 – Reuters (Rocky Swift and Gregor Hunter): “Japanese government bonds tumbled on Wednesday, sending benchmark yields to near 17-year highs, as traders priced in increased political risks and a hazy outlook for the central bank's policy normalisation path. In a sign of how nervous markets are, the Ministry of Finance’s first sale of super-long government debt since a bruising electoral defeat for Prime Minister Shigeru Ishiba logged the weakest demand in almost 14 years… The 10-year JGB yield jumped as much as 10 bps to 1.6%, marking its biggest move in months and the highest level since October 2008. Super-long term JGB yields hit record highs in May and are back near those levels… ‘We’re seeing a possible buyers’ strike playing through,’ said Chris Weston, head of research at broker Pepperstone.”
July 24 – Bloomberg (Alastair Gale, Ruth Carson, and Anya Andrianova): “Since World War II, Japan has built a reputation as a global safe haven for investors in part due to a consensus-driven political system helmed by one of the world’s most successful big-tent parties. Now the center is unraveling, testing much of what has held true about the nation for decades. An election in Japan’s upper house earlier this week showed the ruling Liberal Democratic Party losing ground to a range of opposition parties, all broadly united by anger over prices rising at the fastest pace in more than 20 years. Yet one in particular was the talk of the town in Tokyo: Sanseito, a right-wing populist party pushing a ‘Japanese-First’ agenda. During the hot summer days leading up to the vote, its candidates railed against foreigners, opposed same-sex marriage and made spending pledges that pricked the ears of investors already on edge about looser fiscal management globally.”
While their politics are notoriously messy, Japanese society has traditionally been the poster child of cohesion and stability. Japan is now suffering from similar insecurity, angst, divisiveness, and nationalism, which has afflicted nations from the U.S. to Europe to the world more generally. For those that dismiss Bubble risk, it’s worth contemplating that Japan still suffers from its late-eighties Bubble.
It felt lonely commending Japan’s post-Bubble policy responses. Perfect they were not, but Tokyo at least avoided doing anything crazy stupid. That is, until they succumbed to Ben Bernanke’s inflationist sophistry. Predictably, the scourge of inflation has undermined Japan’s coveted social order. Now the Ueda Bank of Japan faces extremely difficult decisions. Do they tighten monetary policy to contain inflation and underpin society - when higher rates risk triggering a bond market crisis? And with Japanese finance such a key source of investment and speculative flows for markets globally, what happens in Tokyo won’t stay in Tokyo.
July 25 – Bloomberg: “China’s central bank pumped a sizeable amount of cash into its financial system Friday, a move seemingly intended to stop a bond selloff gaining momentum and destabilizing financial markets. The People’s Bank of China put in 601.8 billion yuan ($84bn) of short-term cash via reverse repurchase agreements, the largest daily net injection since January.”
For the Week:
The S&P500 gained 1.5% (up 8.6% y-t-d), and the Dow added 1.3% (up 5.5%). The Utilities increased 0.6% (up 11.9%). The Banks gained 1.6% (up 14.6%), and the Broker/Dealers added 0.2% (up 29.3%). The Transports jumped 3.2% (up 3.0%). The S&P 400 Midcaps rose 1.5% (up 3.1%), and the small cap Russell 2000 increased 0.9% (up 1.4%). The Nasdaq100 gained 0.9% (up 10.8%). The Semiconductors fell 1.5% (up 13.4%). The Biotechs rallied 2.6% (up 0.3%). While bullion fell $13, the HUI gold index rallied 5.1% (up 60.6%).
Three-month Treasury bill rates ended the week at 4.2425%. Two-year government yields increased five bps to 3.92% (down 32bps y-t-d). Five-year T-note yields added a basis point to 3.96% (down 42bps). Ten-year Treasury yields slipped three bps to 4.39% (down 18bps). Long bond yields fell six bps to 4.93% (up 15bps). Benchmark Fannie Mae MBS yields dipped three bps to 5.64% (down 20bps).
Italian 10-year yields were unchanged at 3.55% (up 3bps y-t-d). Greek 10-year yields added a basis point to 3.39% (up 18bps). Spain's 10-year yields were unchanged at 3.31% (up 25bps). German bund yields increased two bps to 2.72% (up 35bps). French yields dipped a basis point to 3.39% (up 19bps). The French to German 10-year bond spread narrowed three to 67 bps. U.K. 10-year gilt yields declined four bps to 4.64% (up 7bps). U.K.'s FTSE equities index gained 1.4% (up 11.6% y-t-d).
Japan's Nikkei 225 Equities Index surged 4.1% (up 3.9% y-t-d). Japanese 10-year "JGB" yields jumped six bps to 1.61% (up 50bps y-t-d). France's CAC40 added 0.2% (up 6.1%). The German DAX equities index slipped 0.3% (up 21.6%). Spain's IBEX 35 equities index rose 1.8% (up 22.8%). Italy's FTSE MIB index gained 1.0% (up 19.1%). EM equities were mixed. Brazil's Bovespa index was little changed (up 11.0%), while Mexico's Bolsa index rallied 1.9% (up 15.8%). South Korea's Kospi added 0.3% (up 33.2%). India's Sensex equities index declined 0.4% (up 3.8%). China's Shanghai Exchange Index gained 1.7% (up 7.2%). Turkey's Borsa Istanbul National 100 index jumped 2.7% (up 8.3%).
Federal Reserve Credit declined $3.0 billion last week to $6.612 TN. Fed Credit was down $2.278 TN from the June 22, 2022, peak. Over the past 306 weeks, Fed Credit expanded $2.885 TN, or 77%. Fed Credit inflated $3.801 TN, or 135%, over the past 663 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $12.4 billion last week to an eight-year low $3.218 TN. "Custody holdings" were down $92 billion y-o-y, or 2.8%.
Total money market fund assets added $9.2 billion to $7.075 TN. Money funds were up $921 billion, or 15.0%, y-o-y.
Total Commercial Paper declined $9.7 billion to $1.395 TN. CP has expanded $307 billion y-t-d and $87 billion, or 6.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates slipped a basis point to 6.74% (down 4bps y-o-y). Fifteen-year rates fell five bps to 5.87% (down 20bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps 6.83% (down 43bps).
Currency Watch:
For the week, the U.S. Dollar Index declined 0.8% to 97.645 (down 10.0% y-t-d). For the week on the upside, the Swedish krona increased 1.4%, the Mexican peso 1.1%, the euro 1.0%, the New Zealand dollar 0.9%, the Australian dollar 0.9%, the Japanese yen 0.9%, the Swiss franc 0.7%, the South Korean won 0.6%, the Singapore dollar 0.3%, the Brazilian real 0.3%, the Norwegian krone 0.3%, the Canadian dollar 0.2%, and the British pound 0.2%. On the downside, the South African rand declined 0.3%. The Chinese (onshore) renminbi increased 0.07% versus the dollar (up 1.81% y-t-d).
Commodities Watch:
July 21 – Wall Street Journal (Brian Spegele): “China’s thirst for oil drove global demand for decades. Now a government campaign to curb that addiction is nearing a milestone, with national consumption expected to peak by 2027, then begin to fall. Chinese officials have long worried that the U.S. and its allies could hamstring the nation’s economy by choking off its supply of foreign oil. So China has poured hundreds of billions of dollars into weaning itself off the imported stuff... ‘The energy rice bowl must be held in our own hands,’ Chinese leader Xi Jinping has said. Across China, fleets of gas-guzzling Volkswagen and Hyundai taxicabs are being replaced by electric models designed and produced locally. Last year, nearly half of passenger vehicles sold in the country were either all-electrics or plug-in hybrids, compared with 6% in 2020.”
The Bloomberg Commodities Index fell 1.6% (up 4.8% y-t-d). Spot Gold slipped 0.4% to $3,337 (up 27.2%). Silver was unchanged at $38.16 (up 32.0%). WTI crude dropped $2.18, or 3.2%, to $65.16 (down 9%). Gasoline fell 2.6% (up 4%), and Natural Gas sank 12.8% to $3.11 (down 14%). Copper jumped 3.2% (up 44%). Wheat fell 1.5% (down 2%), and Corn dropped 2.2% (down 13%). Bitcoin slipped $700, or 0.6%, to $117,640 (up 25.5%).
Market Instability Watch:
July 22 – Bloomberg (Mia Glass): “Japan’s 40-year government bond auction saw its weakest demand since 2011 amid concerns over government spending and after the US and Japan reached a trade deal. The bid-to-cover ratio… came in at 2.127, compared to 2.214 at the previous auction. The bonds yielded 3.375%, the highest on record.”
July 23 – Bloomberg (Carmen Reinicke and Yiqin Shen): “The latest bout of meme stock mania, in which retail investors are pocketing quick fortunes by piling into heavily-shorted stocks like Kohl’s Corp. and Opendoor Technologies Inc., is likely getting some help from what Wall Street derivatives pros call a gamma squeeze. A gamma squeeze occurs when a rising stock price forces options dealers who have sold call contracts to swiftly adjust their hedges, sending the price even higher. The wild swings can be seen in both directions, as the dealers buy into rallies and sell into reversals. Trading in Opendoor is a good example. The stock price surged more than 300% from July 14 to July 21. On Monday alone, when the shares leaped as much as 120%, more than two million call contracts traded as well. ‘One of the things that happens now is that the market makers adjust options pricing much more rapidly as they see a meme mania is going to happen, tracking Wall Street Bets and other social media platforms,’ said Brent Kochuba, founder of options platform SpotGamma.”
Global Credit and Financial Bubble Watch:
July 24 – Reuters (Mike Dolan): “Amid all the mounting political pressure on the Federal Reserve to resume cutting interest rates, Chair Jay Powell is already overseeing the loosest financial conditions in the U.S. economy since before the central bank started hiking early in 2022… The Chicago Fed's national index of broad financial conditions in the U.S. economy has fallen to its lowest level in more than three years… There are many other indexes of financial conditions, of course, but they mostly tell a similar story. Goldman Sachs’ U.S. equivalent is back down to where it was late last year, just a whisker from its three-year low.”
July 24 – Bloomberg (Ellen Schneider and Olivia Fishlow): “When word spread last week that President Donald Trump is keen to spur more private assets into retirement funds, the biggest direct lenders were more than prepared. In fact, the industry has been laying the groundwork for quite some time. Firms including KKR & Co., Blackstone Inc. and Blue Owl Capital Inc. had already set up partnerships with 401(k) managers. Trade groups and industry executives have also been lobbying officials in Washington and making their case to the public — all part of a long-running effort to expand private credit’s reach. In interviews, executives repeatedly made this point: why should only the elite have access to this type of investment?”
July 24 – Bloomberg: “China’s 30-year government bond auction… drew its highest yield since March, as risk sentiment improved and concerns over further losses cooled demand for debt. The Ministry of Finance sold the 30-year special sovereign notes at an average yield of 1.97% on Thursday…”
July 19 – Bloomberg (Josyana Joshua and Aaron Weinman): “US junk debt investors are piling into the riskiest bonds… Bonds rated in the CCC range have gained 0.75% this month through Thursday, outpacing all other ratings tiers, including investment-grade debt. The highest-rated junk bonds, those in the BB tier, have turned in the worst performance among speculative-grade debt... ‘As investors have become more comfortable, they’ve begun to reach for risk,’ said Robert Tipp, chief investment strategist at PGIM…”
July 24 – Bloomberg (Charles Williams): “Another seven US ABS deals priced Wednesday to bring 2025 primary sales to $212.9 billion. As such, issuance is now only 1.2% lower than at this point last year after being down nearly 9% at the end of the second quarter.”
July 22 – Financial Times (Joseph Cotterill and Alan Livsey): “Investors have pushed borrowing costs for highly rated emerging market governments and companies relative to developed markets to near their lowest levels since the global financial crisis… The premium that investors demand to own investment-grade country and company debt over Treasuries has dropped to 1.04 and 1.1 percentage points, respectively. That marks the tightest level for sovereign spreads since 2007…”
July 22 – Bloomberg (Finbarr Flynn): “President Donald Trump’s unpredictable policy moves are driving investor demand for Asian local-currency bonds… Companies and non-sovereign issuers in Asia Pacific have sold about $1.5 trillion in bonds so far in 2025 in the region’s currencies, a 6% rise and a record for this period… Offerings in the three months from April to June were the highest for any quarter. ‘We are definitely seeing more buyers of local-currency Asian bonds than in pre-April,’ said Daniel Tan, a portfolio manager at Grasshopper Asset Management. ‘There are large inflows from pension and sovereign wealth funds looking to diversify away from dollar assets.’”
Trump Administration Watch:
July 19 – Bloomberg (Kriston Capps): “Allies of President Donald Trump are pressing for an investigation into the ongoing restoration of the Federal Reserve’s headquarters… Any evidence of mismanagement or fraud, as White House officials have suggested, could prove a useful pretext for removing… Powell… But the price tag has less to do with ‘ostentatious’ features than the challenges of building — particularly underground — in what was once a swamp… Foundation work for the Fed expansion was so difficult that contractors responsible for the job received a 2025 award for ‘excellence in the face of adversity’… The ongoing renovation and expansion of the historic 1937 building that houses the Fed, plus an adjacent 1931 federal building, has faced setbacks, with costs for the long-overdue rehab climbing more than 30% since 2023… The project was always going to be tricky… Construction on the Marriner S. Eccles Federal Reserve Board Building and the adjacent Federal Reserve East Building involves adding new office space, removing asbestos and lead and replacing antiquated mechanical systems. Neither the Eccles Building… nor the East Building has ever been fully renovated since they were built nearly a century ago.”
July 24 – Axios (Tal Axelrod and Zachary Basu): “The Trump administration’s feverish push for ‘transparency’ over the 2016 Russia investigation is fast becoming a vehicle for MAGA’s white whale: the potential prosecution of former President Obama. President Trump’s war on his predecessor is dramatically escalating just as he faces new pressure over his handling of the Jeffrey Epstein files.. For MAGA, the new focus on ‘Russiagate’ offers a unifying reprieve — a return to familiar territory where Trump is the victim of a conspiracy, not the subject of one. It's a retribution campaign that’s deeply personal to Trump’s most loyal supporters, and one that could plunge the U.S. into uncharted territory if carried to its extreme conclusion. The two most explosive stories in Washington are unfolding in parallel. Director of National Intelligence Tulsi Gabbard appeared at the White House podium Wednesday to unveil newly declassified documents that she claims expose a ‘treasonous conspiracy’ by Obama-era intelligence officials.”
July 23 – Reuters (Bhargav Acharya): “U.S. President Donald Trump… reiterated his criticism of Federal Reserve Chairman Jerome Powell amid his ongoing call for lower rates, and called on the central bank's board to act. ‘Our Rate should be three points lower than they are, saving us $1 Trillion per year (as a Country). This stubborn guy at the Fed just doesn’t get it — Never did, and never will. The Board should act, but they don’t have the Courage to do so!’ Trump wrote…”
July 22 – New York Times (Colby Smith): “The White House showed no sign of easing its pressure campaign on Jerome H. Powell… President Trump… accused Mr. Powell of being ‘political’ for not voting to cut interest rates this year and ignoring his demands to reduce borrowing costs by around three percentage points. Those decisions have so far been unanimously supported by the Fed’s policy-setting committee. ‘Our economy is so strong now, we’re blowing through everything, we’re setting records,’ the president said... ‘People aren’t able to buy a house because this guy is a numbskull, he keeps the rates too high, and probably is doing it for political reasons.’”
July 23 – Reuters (Alexandra Alper): “U.S. Treasury Secretary Scott Bessent… suggested without evidence that the Federal Reserve's widely followed economic forecasts are motivated by politics, as the Trump administration steps up pressure on the U.S. central bank to cut interest rates. ‘The Fed publishes something called a summary of economic projections, and it’s pretty politically biased,’ Bessent said… President Donald Trump has demanded the Fed deliver an immediate 300 bps rate cut.”
July 23 – Financial Times (Joe Miller and Michael Acton): “The Trump administration plans to vet AI models for ‘ideological bias’ and block companies whose products fail to provide ‘objective truth’ from doing business with the US government. In a policy document…, the administration said it would update procurement rules to exclude developers who did not ensure their systems were impartial. It also vowed to stop federal funding for AI projects from going to states with ‘burdensome AI regulations’.”
July 21 – Financial Times (Edward Luce): “Sagging in the polls? Hurtling towards electoral oblivion? Canada’s Mark Carney, Australia’s Anthony Albanese and now Brazil’s Luis Inácio Lula da Silva have a fix for you. Get Donald Trump to launch a trade war on your country. Few things rally voters around the flag quicker than a superpower assault on your bottom line. Though the Vatican is no trading entity, America’s first pontiff, Robert Francis Prevost, might also credit Trump with his election. Trump and the late Pope Francis, Pope Leo XIV’s predecessor, were not mutual admirers.”
China Trade War Watch:
July 21 – Bloomberg (Katia Dmitrieva): “President Donald Trump’s effort to target China through its trading partners across global supply chains threatens to erode the country’s growth and most of its exports to the US, according to Bloomberg Economics. China has increasingly relied on third countries for the manufacturing of final products or components… China’s share of total value-added manufacturing of goods destined for the US through countries including Vietnam and Mexico surged to 22% in 2023 from 14% in 2017… If Trump is successful in targeting transshipments via higher levies or supply chain requirements, it would threaten 70% of China’s exports to the US…”
July 20 – Bloomberg: “China boosted shipments of rare earth magnets in June — including to the US — after a global supply squeeze that threatened factory closures and inflamed trade tensions… Flows to the US alone rose to 353 tons, up from just 46 tons. Total shipments were still substantially lower than before Beijing launched export controls in early April.”
July 23 – Bloomberg (Annmarie Hordern and Eric Martin): “US Commerce Secretary Howard Lutnick condemned China’s move to prevent a Commerce Department employee from exiting the country as ‘outrageous behavior,’ and said the Trump administration is working to resolve the situation. ‘He went home and he was arrested, and they’re holding his passport,’ Lutnick said… ‘So I give that to the State Department, and the State Department deals with that. But it is outrageous behavior. It’s just outrageous behavior.’”
July 24 – Financial Times (Zijing Wu and Eleanor Olcott): “At least $1bn worth of Nvidia’s advanced artificial intelligence processors were shipped to China in the three months after Donald Trump tightened chip export controls… A Financial Times analysis of dozens of sales contracts, company filings and multiple people with direct knowledge of the deals reveals that Nvidia’s B200 has become the most sought-after — and widely available — chip in a rampant Chinese black market for American semiconductors.”
Trade War Watch:
July 22 – Reuters (Leika Kihara): “Japan’s trade deal with the U.S. has reduced uncertainty surrounding the economy, the central bank’s deputy governor Shinichi Uchida said, signaling optimism that conditions for resuming interest rate hikes may start to fall in place… ‘It's a very big progress that reduces uncertainty for Japan’s economy,’ Uchida said…, adding that the BOJ will incorporate the deal in its quarterly growth and price projections due at the next policy meeting on July 30-31. ‘Given the receding uncertainty, by definition it can be said that the likelihood of Japan durably achieving 2% inflation has heightened,’ Uchida told a news conference.”
July 25 – Reuters (Makiko Yamazaki and Tamiyuki Kihara): “Japan's government said on Friday that profits from a $550 billion investment package agreed in this week's tariff deal with the U.S. would be split between Japan and the U.S. according to the degree of contributions by each side. The comment from a Japanese government official suggests the investment scheme would involve substantial contributions not just from Japan but also from the U.S. government or companies, though the structure of the scheme remains largely unclear. The White House said earlier this week the U.S. would retain 90% of the profits from the $550 billion U.S.-bound investment and loans that Japan would make in exchange for lower tariffs on auto and other exports to the U.S.”
July 23 – Reuters (Kaori Kaneko): “Japan and the United States agreed to keep the current 50% tariff on steel and aluminium as part of the bilateral trade deal, Japanese public broadcaster NHK reported…”
July 23 – Wall Street Journal (Editorial Board): “The trade deal President Trump announced with Japan… is good news—in the narrow sense that it defuses what could have been an extended tariff war with America’s most important ally in Asia. But if this is winning a trade war, we’d hate to see what losing looks like. Mr. Trump hailed the pact with characteristic modesty as ‘perhaps the largest Deal ever made.’ Details remain sparse, but the core appears to be a Japanese commitment to invest $550 billion in the U.S. while reducing barriers to imports of American agricultural products such as rice. In exchange, Mr. Trump will reduce his ‘reciprocal’ tariffs on Japan to 15% from 25%—including, apparently, on autos. The new tariff rate is good news only as relief from 25%.”
July 23 – Financial Times (Andy Bounds): “The EU and US are closing in on a trade deal that would impose 15% tariffs on European imports, similar to the agreement Donald Trump struck with Japan this week. Brussels could agree to the so-called reciprocal levies to avoid the US president’s threat to raise them to 30% from August 1, three people… told the Financial Times. ‘The Japan agreement made clear the terms of the shakedown,’ said one EU diplomat. ‘Most member states are holding their noses and could take this deal.’ Both sides would waive tariffs on some products, including aircraft, spirits and medical devices, the people said.”
July 21 – Wall Street Journal (Tom Fairless): “The global economy is sailing through this year’s historic increase in tariffs, displaying an unexpected trait: resilience… Global producers brought forward purchases and rerouted goods destined for the U.S. through third-party countries that are subject to lower tariffs. For the most part, households and businesses have continued to spend and invest… The world economy grew at a 2.4% annual rate in the first half of this year, around its longer-term trend, according to JPMorgan. Trade volumes are buoyant, stock markets on both sides of the Atlantic have rebounded to record highs and growth forecasts from Europe to Asia are being raised.”
July 23 – Associated Press (Josh Boak and Alexa St. John): “U.S. automakers worry that President Donald Trump’s agreement to tariff Japanese vehicles at 15% would put them at a competitive disadvantage, saying they will face steeper import taxes on steel, aluminum and parts than their competitors. ‘We need to review all the details of the agreement, but this is a deal that will charge lower tariffs on Japanese autos with no U.S. content,’ said Matt Blunt, president of the American Automotive Policy Council, which represents the Big 3 American automakers… Blunt said… U.S. companies and workers ‘definitely are at a disadvantage’ because they face a 50% tariff on steel and aluminum and a 25% tariff on parts and finished vehicles, with some exceptions for products covered under the United States-Mexico-Canada Agreement that went into effect in 2020.”
July 21 – Politico (Giorgio Leali): “The French government wants Brussels to turn the screws on Washington as transatlantic trade talks head to the wire with no deal in sight. A French official working on trade issues, granted anonymity to discuss sensitive matters, said Paris believes that European negotiators must ‘make it clear that we’re ready to press the red button’ if Donald Trump refuses to agree to acceptable terms. A second French official said that the European Commission should recognize it is dealing with an ally who is ‘raising tensions in a trade war it started.’”
July 20 – Bloomberg (Daniel Carvalho): “Donald Trump’s tariff threat against Brazil over a legal probe into his political ally, former President Jair Bolsonaro, caught the Supreme Court in Brasilia off guard. The top court is in recess during July — not all its judges were even in the country — making it difficult to convene to formulate a response. But as soon as Trump threatened 50% tariffs on Brazil on July 9, a group of justices immediately began discussing a response aimed more at asserting national sovereignty than easing tensions with the US.”
July 22 – Wall Street Journal (Amrith Ramkumar and Gavin Bade): “The Trump administration is using its global trade wars to advance the interests of the U.S. technology industry, seeking to prevent foreign countries from targeting American internet firms. The administration hopes to use the threat of tariffs and access to the U.S. economy to stop multiple countries from imposing new taxes, regulations and tariffs on American tech companies and their products ahead of a self-imposed Aug. 1 deadline…”
Budget Watch:
July 21 – Associated Press (Kevin Freking): “President Donald Trump’s tax and spending law will add $3.4 trillion to federal deficits through 2034, the Congressional Budget Office reported Monday, a slight increase in the projection that takes into account the final tweaks that Republicans made before getting the legislation over the finish line. More than 10 million people will be uninsured under the law in 2034 because of the law…”
July 22 – Bloomberg (Akayla Gardner): “President Donald Trump said he is considering a proposal to end capital gains taxes on home sales in a bid to boost the housing market. ‘We’re thinking about that,’ Trump said… ‘But would also unleash it just by lowering the interest rates. If the Fed would lower the rates, we wouldn’t even have to do that. But we are thinking about no tax on capital gains on houses.’”
Constitution Watch:
July 21 – Associated Press (David Bauder): “President Donald Trump… followed up his lawsuit against The Wall Street Journal over last week’s Jeffrey Epstein story by banishing one of the newspaper’s reporters from Air Force One for an upcoming Scotland trip. The moves reflect Trump’s aggressiveness toward media who displease him — even a media magnate, Rupert Murdoch… Trump filed a $10 billion defamation lawsuit against the Journal and Murdoch on Friday because of the newspaper’s article about a sexually suggestive letter bearing Trump’s name that was included in a 2003 album compiled for alleged sex trafficker Epstein’s birthday.”
July 23 – Bloomberg (Annmarie Hordern): “President Donald Trump said he considered attempting to break up Nvidia Corp. to increase competition in artificial intelligence chips before finding out ‘it’s not easy in that business.’ ‘I said, ‘Look, we’ll break this guy up,’ before I learned the facts here,’ Trump said… Trump said he was told by aides that doing so was ‘very hard’ and that the company held a substantial advantage over all competitors that would take years to overcome. ‘I figured we could go in and we could sort of break them up a little bit, get them a little competition, and I found out it’s not easy in that business,’ Trump added.”
U.S./Russia/China/Europe/Iran Watch:
July 20 – Financial Times (Joe Leahy and Ryan McMorrow): “The US embassy in China has expressed concerns about damage to bilateral relations from exit bans, after Beijing prevented an American commerce department employee from leaving the country. The tensions over exit bans come as the two superpowers are locked in a trade war, and ahead of a potential meeting between US President Donald Trump and Chinese leader Xi Jinping.”
July 24 – Reuters (Laurie Chen, Liz Lee and Xiuhao Chen): “EU-China trade ties have hit a ‘clear inflection point,’ European Commission President Ursula von der Leyen said… in Beijing, capping a tense summit with top Chinese leaders dominated by concerns on commerce and the Ukraine war. Expectations were low for the summit in the Chinese capital marking 50 years of diplomatic ties after weeks of escalating tension and wrangling that led to the duration being abruptly halved to a single day at Beijing's request. ‘We have very frankly and openly raised our concerns...on the trade, investment and geopolitical issues... We have partially identified solutions,’ von der Leyen told a press conference…”
July 22 – Bloomberg (Hadriana Lowenkron): “The US ambassador to NATO said China needed to be ‘called out for their subsidizing’ of Russia’s war in Ukraine as the Trump administration ratchets up its threat to impose tariffs if Moscow does not agree to a peace deal. ‘China thinks they’re fighting a proxy war through Russia, and we’re seeing in some statements by the Chinese government that they want to keep the United States and our allies occupied with this war, so that we can’t focus on our other strategic challenges,’ NATO ambassador Matthew Whitaker said…”
July 21 – Politico (Koen Verhelst): “Russia’s attempts to disrupt German society have grown significantly this year, according to Germany’s military counterintelligence chief. ‘We are talking about a sharp increase in cases of espionage and hybrid measures,’ Martina Rosenberg told… DPA. ‘The approach is more massive and also more aggressive.’ The number of cases where Russian involvement is suspected has doubled over the first half of this year…”
New World Order Watch:
July 21 – Financial Times (Mercedes Ruehl, Henry Foy, Laura Dubois and Joe Leahy): “China is making a concerted effort to expand its influence throughout the UN, taking advantage of Donald Trump’s disdain for multilateralism to place officials and push Beijing’s agenda more aggressively… After cuts to US foreign aid prompted what could be the UN’s most radical restructuring in decades, China has stepped up attempts to fill the vacuum, particularly in the Swiss diplomatic hub of Geneva…”
Middle East Watch:
July 21 – Reuters (Kanishka Singh): “Iranian Foreign Minister Abbas Araghchi told Fox News that Tehran cannot give up on its uranium enrichment program which was severely damaged during the Israel-Iran war last month. Prior to the war, Tehran and Washington held five rounds of nuclear talks mediated by Oman but could not agree on the extent to which Iran should be allowed to enrich uranium… ‘It is stopped because, yes, damages are serious and severe. But obviously we cannot give up (on) enrichment because it is an achievement of our own scientists. And now, more than that, it is a question of national pride,’ the foreign minister told… Fox News…”
AI Bubble Watch:
July 22 – Axios (Scott Rosenberg): “The artificial intelligence industry is getting nothing but green lights in all directions — now it needs to deliver on its promises. AI makers are getting everything they have ever asked for or could possibly want. 1. No limits: More money, energy and resources are flowing into the technology's development than any other industry has ever received in such a concentrated time span. Four companies — Alphabet/Google, Microsoft, Meta and Amazon — expect to spend more than $300 billion this year on AI, while private investors and governments pour hundreds of billions more into AI infrastructure. Public and private projects are rushing to supply the vast energy inputs AI development and use requires. A Pittsburgh summit featuring President Trump last week made clear that the emphasis will be on fossil fuels and nuclear, with little regard for climate concerns or environmental costs. 2. No rules: In the second Trump era, the U.S. has dropped any pretense of trying to erect regulatory guardrails around AI.”
July 23 – New York Times (Kevin Roose): “For much of the last decade, America’s partisan culture warriors have fought over the contested territory of social media — arguing about whether the rules on Facebook and Twitter were too strict or too lenient, whether YouTube and TikTok censored too much or too little and whether Silicon Valley tech companies were systematically silencing right-wing voices. Those battles aren’t over. But a new one has already started. This fight is over artificial intelligence, and whether the outputs of leading A.I. chatbots like ChatGPT, Claude and Gemini are politically biased. Conservatives have been taking aim at A.I. companies for months.”
July 24 – Associated Press (Alexa St. John): “President Donald Trump’s plan to boost artificial intelligence and build data centers across the U.S. could speed up a building boom that was already expected to strain the nation’s ability to power it. The White House released the ‘AI Action Plan’ Wednesday, vowing to expedite permitting for construction of energy-intensive data centers… The plan says to combat ‘radical climate dogma,’ a number of restrictions — including clean air and water laws — could be lifted, aligning with Trump’s ‘American energy dominance’ agenda and his efforts to undercut clean energy.”
July 22 – Wall Street Journal (Patrick Coffee): “Chatbots are becoming the go-to source for online answers for many consumers… An estimated 5.6% of U.S. search traffic on desktop browsers last month went to an AI-powered large language model like ChatGPT or Perplexity, according to Datos… The percentage of traffic that went to browser-based AI search has more than doubled since June 2024, when it was 2.48%, according to Datos… It has more than quadrupled since January 2024, when the figure was just under 1.3%.”
July 21 – Bloomberg (Naureen S Malik): “The biggest US grid has no spare supply for new data centers, meaning project developers will need to start building their own power plants, according to the system’s independent watchdog. ‘There is simply no new capacity to meet new loads,’ said Joe Bowring, president of Monitoring Analytics, which is the independent watchdog for PJM Interconnection, the grid that extends from Washington DC to Chicago. ‘The solution is to make sure that people who want to build data centers are serious enough about it to bring their own generation.’ PJM, which is home to the highest domestic concentration of data centers, is becoming a test case for artificial intelligence’s voracious energy needs.”
July 22 – Financial Times (Alex Rogers, Ian Hodgson, Eva Xiao and Stephen Morris): “Companies and business groups are rushing to influence Washington’s artificial intelligence policies as the industry booms and Donald Trump’s administration seeks to encourage the powerful technology in the US. More than 500 organisations lobbied the White House and Congress on AI between January and June… The lobbying boom over the past two years highlights how the AI industry, which is backed by Big Tech companies and deep-pocketed investors, is looking to shape policy at a time of intense debate about the technology.”
July 22 – CNBC (MacKenzie Sigalos): “OpenAI and Anthropic continue to lead a fundraising bonanza in artificial intelligence, raising historic rounds and stratospheric valuations. But when it comes to finding AI exits for venture firms, the market looks a lot different. AI startups raised $104.3 billion in the U.S. in the first half of this year, nearly matching the $104.4 billion total for 2024, according to PitchBook. Almost two-thirds of all U.S. venture funding went to AI, up from 49% last year, PitchBook said.”
July 18 – Wall Street Journal (Berber Jin, Keach Hagey and Ben Cohen): “Hundreds of employees at one of Silicon Valley’s hottest AI startups gathered in their offices last Friday expecting a celebratory announcement. For months, OpenAI had been talking to Windsurf about buying it for $3 billion, and now it seemed like the rank-and-file were finally getting confirmation that the deal was about to become official… Instead, they learned that Windsurf’s chief executive, Varun Mohan, had left the company to join Google, taking with him a small group of artificial-intelligence researchers and engineers. After hearing the news, some of the staff began to cry. By Monday morning, another twist in the saga would bring those Windsurf employees back to the same room for a second announcement: The rest of their company would be acquired by a rival AI startup. In other words, it was just a typical weekend in Silicon Valley.”
Bubble and Mania Watch:
July 23 – Wall Street Journal (Krystal Hur and Jack Pitcher): “Individual investors are once again loading up on a group of unloved stocks and taking to social media to defend them from the haters and the short sellers. Meet the cast of the meme-stock craze, season two. ‘Let’s goo!!’ a user named Hot-Ticket9440 wrote on a subreddit forum Tuesday as shares of Kohl’s KSS -14.23%decrease; red down pointing triangle, the department-store chain, surged by nearly 40%. ‘Max pain on the shorts buy every dip. Together we strong.’ ‘$OPEN has GameStop vibes written all over it,’ Skip Tradeless wrote Tuesday on X of Opendoor Technologies, the real-estate platform. ‘WE WON’T STOP UNTIL $82!’”
July 24 – Bloomberg (Bernard Goyder): “A measure of Wall Street’s expectations for volatility over the next month hit its lowest level since Feb. 14 on Thursday as stocks traded near all-time highs on solid jobs data. The Cboe Volatility Index, known as the VIX, fell nearly half a point… to an intraday low of 14.95 points… The drop is a sign that some investors who have been betting against the S&P 500 Index are now cutting their losses. Specifically, traders known as vol buyers who own positions that will benefit from a decline in stocks or an increase in volatility, are starting to capitulate. ‘You’re seeing some vol buyers just kind of throw their hands in the air,’ said Kris Sidial, co-chief investment officer at hedge fund The Ambrus Group.”
July 21 – New York Times (Colby Smith): “A cohort of the world’s largest asset managers is leaning harder into the rally in risk assets as US stocks push to fresh highs, defying persistent trade and geopolitical tensions. Firms such as Invesco Ltd., Fidelity International Ltd. and JPMorgan Asset Management are reinforcing bullish bets across technology shares… The high-octane wager is that while President Donald Trump is threatening to disrupt the economic order anew, he will step back from the brink. That’s helping justify risk exposure at a time when valuations are stretched and macro headwinds persist. In a market that rewards conviction and punishes caution, sitting out is starting to look like the riskiest position of all.”
July 19 – New York Times (Ian Frisch): “There’s a new darling on Wall Street: private markets. Because that’s where the party is now. Companies are staying private for longer — the number of publicly traded companies has dropped by nearly half over the past three decades, with nearly 1,500 start-ups worldwide currently boasting a valuation of $1 billion or more — and, according to the global consultancy Bain & Company, private market assets have more than tripled since 2013. The firm expects them to grow twice as fast as public assets in the future, reaching $62 trillion globally by 2034. Historically, private equity investments were accessible only to wealthy and experienced investors. But in recent years, interest has soared among the retail class.”
July 21 – Financial Times (Steve Johnson): “Asset managers are launching active exchange traded funds at a record rate this year… Twice as many active ETFs — which try to make money by veering away from index weightings — as passive tracker ETFs had been launched across the US and Europe this year… In the US, there were now a greater number of active ETFs in existence than their passive peers… While the bulk of the $17tn of assets in ETFs is still held in index-tracking products, the surge in launches nevertheless represents a significant shift…”
July 21 – Bloomberg (Muyao Shen): “Apollo Global Management Inc. has pushed deeper into Wall Street’s digital frontier. Through a novel partnership with Securitize Inc., the $785 billion asset manager is offering crypto-native investors blockchain-based access to one of its private credit strategies — an experiment that has already attracted more than $100 million since launching in January.”
July 21 – Wall Street Journal (Lauren Thomas and Ben Glickman): “Blank-check company Dynamix is merging with another entity to create a new company known as the Ether Machine. The combined company plans to manage over $1.5 billion in ether, the largest cryptocurrency behind bitcoin… Dozens of companies—many of which previously had nothing to do with crypto—have allocated more capital for buying bitcoin, pivoting to a strategy often called ‘bitcoin treasury.’ Michael Saylor of Strategy has led the way, turning his company previously known as MicroStrategy into a holder of dozens of billions of dollars in the token as its price has surged.”
July 21 – Financial Times (Joshua Franklin): “JPMorgan… is exploring lending against clients’ cryptocurrency holdings, in the latest sign that the biggest US banks are endorsing the move of digital assets into the mainstream. The policy would mark a big shift for JPMorgan’s chief executive Jamie Dimon, who eight years ago branded bitcoin a ‘fraud’ that would ‘eventually blow up’ and was only useful for drug dealers and murderers. JPMorgan could start lending directly against crypto assets such as bitcoin and ethereum next year… The move would underscore the extent to which big banks, and the regulated financial industry more broadly, are opening up to closer interaction with cryptocurrencies.”
July 22 – Bloomberg (Anna J Kaiser): “A duplex penthouse at the planned 50-story Waldorf Astoria Residences tower in St. Petersburg, Florida, sold for $27 million, smashing the record for the most expensive condo in the Tampa Bay area.”
Inflation Watch:
July 23 – Bloomberg (Naureen S. Malik): “Businesses and households served by the largest US power grid will spend a record $16.1 billion to ensure electricity supplies amid a massive artificial intelligence-driven demand surge. The payments to generators and other suppliers were set Tuesday at a power auction run by PJM Interconnection LLC, which operates the grid stretching from the Midwest to the mid-Atlantic… The price increase prompted calls from utilities and energy groups to build more generation. The AI boom is spurring the biggest surge in power demand in decades, leading to soaring utility bills and disagreement over which resources are best equipped to satisfy those needs.”
July 20 – Bloomberg (Emma Court): “A 300% spike in Australian lettuce prices. A 50% rise for European olive oil and 80% for US vegetables. Researchers from the Barcelona Supercomputing Center and the European Central Bank have traced back those price jumps to extreme weather they say is linked to climate change… ‘Unprecedented conditions are set to become increasingly common across the world,’ the study’s authors say. ‘At the same time, new records for extreme conditions will continue to be set, further from those to which agricultural production and economic systems are currently adapted.’”
July 21 – Reuters (Aatreyee Dasgupta): “U.S. homebuilders are navigating several headwinds as they approach quarterly earnings reports, including rising costs of construction materials, persistently high interest rates, and concerns that President Donald Trump’s proposed mass deportation efforts could significantly impact the construction industry… Evercore ISI’s July survey revealed the weakest spring selling season since 2019… Costs for homebuilders have been rising in recent years due to post-COVID inflation for materials, while U.S. President Donald Trump’s tariff and immigration policies are adding further costs. ‘(The tariffs) may have an additional material impact on the cost structure of homebuilding in the U.S., perhaps by another 4-10% increase (to the cost of construction) in material alone depending on geographic location and the type of material being sourced,’ said Stuart Siegel, CEO of real estate firm Engel & Völkers’ Americas operations.”
July 21 – CNN (Vanessa Yurkevich): “First it was eggs, now it’s beef. The last time Americans likely noticed spiking prices at the grocery store was when eggs reached record-highs. Since then, egg prices have fallen after the deadly avian flu outbreak was contained and producers built back supply. Now, beef prices are hitting records, rising almost 9% since January…, and retailing for $9.26 a pound. June’s consumer price index showed steak and ground beef prices are up 12.4% and 10.3%, respectively, over the last year.”
July 22 – Bloomberg (Kristina Peterson): “Hershey Co. is raising prices on its candy due to historically high cocoa costs. The… maker of Hershey’s chocolates and Reese’s Peanut Butter Cups told its retailers last week that it would be implementing a roughly double-digit price increase…”
July 21 – Bloomberg (Zoe Tillman): “A US orange juice distributor is suing over President Donald Trump’s move to impose a 50% tariff on Brazil... Johanna Foods Inc. is arguing that Trump’s reasons for the levy increase — including support for Brazil’s former right-wing President Jair Bolsonaro — don’t present ‘unusual and extraordinary’ threats that give him emergency authority to circumvent Congress’ taxing power. The… company estimates that the Brazil tariffs would increase its costs for not-from-concentrate orange juice from Brazil by $68 million over the next 12 months and raise retail costs for consumers between 20-25%. According to the complaint, Brazil supplies more than half of all orange juice sold in the US.”
Federal Reserve Watch:
July 24 – Associated Press (Christopher Rugaber, Josh Boak and Chris Megerian): “After months of criticizing Federal Reserve Chair Jerome Powell, President Donald Trump took the fight to the Fed’s front door…, publicly scorning the central bank chief over the ballooning costs of a long-planned building project. Powell pushed back, challenging the president’s latest price tag as incorrect. Wearing hard hats and grim faces…, Trump and Powell addressed the cameras. Trump charged that the renovation would cost $3.1 billion, much higher than the Fed’s $2.5 billion figure. Powell, standing next to him, shook his head. The Fed Chair, after looking at a paper presented to him by Trump, said the president was including the cost of renovating a separate Fed building… that was finished five years ago.”
July 20 – Wall Street Journal (Brian Schwartz and Nick Timiraos): “Treasury Secretary Scott Bessent in recent days privately laid out his case to President Trump for why he believed Trump shouldn’t try to oust Federal Reserve Chair Jerome Powell… Bessent’s reasons for avoiding a messy dispute over Powell’s final 10 months as Fed chair focused on a few themes: the possible effects on the economy and markets, the prospect that the Fed is already moving toward cutting interest rates later this year, and the likely political and legal obstacles that such a move would face, these people said.”
July 19 – Fortune (Jason Ma): “Federal Reserve Chairman Jerome Powell signaled in 2019 that he would rather go down with the ship than save his own skin and compromise the independence of the central bank… During a House Financial Services Committee hearing in July of that year, Powell was asked by then-Chairwoman Maxine Waters, ‘If you get a call from the president today or tomorrow and he said ‘I’m firing you. Pack up and it’s time to go.’ What would you do?’ ‘Of course I would not do that,’ Powell replied… According to the 2022 book Trillion Dollar Triage by Wall Street Journal reporter Nick Timiraos, he was even more adamant in private… ‘I will never, ever, ever leave this job voluntarily until my term ends under any circumstances. None whatsoever. You will not see me getting in the lifeboat,’ Powell told a reporter in the spring of 2019. ‘It doesn’t occur to me in the slightest that there would be any situation in which I would not complete my term other than dying.’”
July 18 – Yahoo Finance (Jennifer Schonberger): “Chicago Federal Reserve president Austan Goolsbee… expressed support for Jerome Powell and central bank independence…, saying the Fed chair is a ‘totally honorable guy.’ ‘I, as well as a virtual unanimity of economists, believe that central bank independence from political interference is absolutely critical to the operation of the Fed and of the economy,’ Goolsbee said… ‘If you just look at places where they do not have independence for the central bank, inflation is higher, growth is worse, unemployment and the job market do worse, and everyone knows that.’ He added that ‘it pains me to hear people actively discussing whether the central bank should be independent. There’s nothing good can come of discussion like that.’”
July 21 – Financial Times (Colby Smith): “US Treasury secretary Scott Bessent has called for an inquiry into the ‘entire Federal Reserve institution’, in the latest sign of how top Trump administration officials are cranking up pressure on the central bank. ‘What we need to do is examine the entire Federal Reserve institution and whether they have been successful’… Trump last week asked a group of Republican lawmakers whether he should sack Powell, but later clarified that he had no plans to do so unless he needed to ‘leave for fraud’. Bessent later posted on X that, while the independence of the Fed ‘is a cornerstone of continued US economic growth and stability… this autonomy is threatened by persistent mandate creep into areas beyond its core mission’.”
July 23 – Bloomberg (Caitlin Reilly): “House Speaker Mike Johnson said he is ‘disenchanted’ with Jerome Powell, as President Donald Trump attacks the Federal Reserve chairman over frustrations with high interest rates. Asked about whether he would support Trump firing Powell, Johnson, who has strong ties to the president and was in the Oval Office as recently as Tuesday, said he was unclear on the legal authority to dismiss the Fed chief. ‘But I will tell you that I have been, can I use the word disenchanted?’ Johnson said…”
July 21 – Axios (Neil Irwin): “Most of the time, the Federal Reserve makes a profit — creating money out of thin air is a pretty lucrative business — and hands its earnings over to the U.S. Treasury. Not lately. The Fed has had a cumulative net loss of $192 billion over the last two years. It is primarily due to the reality that just as printing money is profitable, sucking money out of the economy to fight inflation can be expensive. Central banks generally view ‘seigniorage,’ the earnings that come from money creation, as a side effect of operations rather than the goal. Over the last two years, the Fed has essentially experienced reverse seigniorage, as it has hiked interest rates and shrunk its balance sheet to reduce inflation.”
U.S. Economic Bubble Watch:
July 24 – Bloomberg (Nazmul Ahasan): “US business activity expanded in July at the fastest rate this year as a strengthening in services more than offset a contraction in manufacturing. The S&P Global flash July composite output index rose to 54.6 from 52.9 last month… The group’s measure of services activity also advanced to the highest level this year… The composite measure of prices paid ticked higher this month. A gauge of prices received also edged up in a sign companies are having success passing along higher materials costs.”
July 24 – Associated Press (Matt Ott): “The number of Americans filing for jobless aid fell for the sixth straight week, hitting the lowest level since mid-April… Jobless claims for the week ending July 19 fell by 4,000 to 217,000. That’s fewer than the 227,000 new applications analysts were expecting… The total number of Americans collecting unemployment benefits for the week of July 12 remained stable, rising by just 4,000 to 1.96 million.”
July 23 – CNBC (Diana Olick): “Mortgage rates rose last week to the highest level in four weeks, but mortgage demand didn’t really move… Applications for a mortgage to purchase a home rose 3% for the week and were also 22% higher than the same week one year ago.”
July 23 – Bloomberg (Michael Sasso): “Sales of previously owned US homes fell in June to a nine-month low as potential buyers continued to bristle at record prices and high borrowing costs. Contract closings decreased 2.7% in June to an annualized rate of 3.93 million… The median sales price increased 2% in June from a year ago to $435,300. Home prices continue to rise even after a recent pickup in inventory. ‘Multiple years of undersupply are driving the record high home price. Home construction continues to lag population growth,’ Lawrence Yun, NAR chief economist, said… Economists at Goldman Sachs said in a recent note that 87% of mortgage holders have rates below current rates, and two-thirds have borrowing costs 2 percentage points below current rates, ‘strongly disincentivizing them from moving.’”
July 24 – Reuters (Lucia Mutikani): “Sales of new U.S. single-family homes increased less than expected in June amid higher mortgage rates, pushing inventory to levels last seen in late 2007… New home sale units rose 0.6% to a seasonally adjusted annualized rate of 627,000 units last month… Sales last month increased 5.1% in the densely populated South. They advanced 6.3% in the Midwest, but plunged 27.6% in the Northeast and dropped 8.4% in the West. The inventory of unsold homes on the market increased to 511,000 units, the highest level since October 2007… At June’s sales pace it would take 9.8 months to clear the supply of new houses on the market…”
July 24 – Bloomberg (Alexandre Tanzi): “Paychecks for more than 40% of American workers are lagging the rate of inflation, and it’s likely middle- and lower-earners who are getting squeezed, according to job-search firm Indeed. Overall US pay growth as measured by the Indeed Wage Tracker is still running ahead of inflation, but the gap has shrunk to the smallest it’s been in 12 months…”
July 21 – Reuters (Michael S. Derby): “U.S. households fared far better when applying for credit for mortgage refinancing or auto loans in June, new figures on credit access from the Federal Reserve Bank of New York show. The bank said… rejected applications for mortgage refinancing dropped to 15% in June, versus 42% in February, which was the worst rejection-rate month in data that goes back to the fall of 2013. The rejection rate for auto loans also retreated, though less dramatically, to 7% in June from February’s 14%. Overall credit applications and rejection rates during the last year largely remained steady, the bank said.”
China Watch:
July 22 – Bloomberg: “A global selloff in longer-dated bonds has finally spilled over into Chinese debt… Futures on China’s 30-year government securities fell as much as 0.7% on Wednesday to head for the longest run of losses since the contracts were launched in April 2023. Yields on similar-maturity debt in the cash market were on track to rise for a sixth straight session after climbing one basis point to 1.92%.”
July 25 – Bloomberg: “China’s budget deficit climbed to a fresh record in the first half, highlighting intensified government efforts to shore up domestic demand as Donald Trump’s tariffs reduce exports to the US. The broad fiscal gap reached 5.25 trillion yuan ($733bn) in January-June… The shortfall widened 45% from a year earlier.”
July 23 – Bloomberg: “Chinese sovereign wealth fund Central Huijin Investment Ltd. pumped around 197.5 billion yuan ($27.6bn) into exchange-traded funds in the second quarter, pushing back against a stock market rout that followed US President Donald Trump’s tariff announcements.”
July 20 – Financial Times (Thomas Hale and Haohsiang Ko): “Land sales across smaller and less wealthy Chinese cities have fallen to their lowest levels since at least 2011… Data from financial information provider Wind shows the total value of all land transactions in third-tier mainland Chinese cities… fell 4% to Rmb362bn ($50bn) in the first half of this year… The value of land transactions, including for residential, commercial and other uses, slipped to Rmb87bn in fourth-tier cities and Rmb51bn in fifth-tier cities — both also the lowest since Wind began compiling the data series in 2011.”
July 23 – Bloomberg (Alan Wong): “Hong Kong police arrested an 18-year-old on suspicion he left what they called ‘seditious’ messages in a bathroom, adding to a recent series of national security actions that signal authorities’ continued efforts to curb dissent.”
Central Banker Watch:
July 24 – Axios (David McHugh): “The European Central Bank left interest rates unchanged… Bank President Christine Lagarde said the current economic environment and the potential impact of higher tariffs was ‘exceptionally uncertain.’ Higher tariffs could slow investment, growth and inflation - or they could be inflationary by disrupting existing supply chains for parts and raw materials.”
July 21 – Reuters (Leika Kihara): “Japan’s election outcome may put the central bank in a double bind as prospects of big spending could keep inflation elevated while potentially prolonged political paralysis and a global trade war provide compelling reasons to go slow on rate hikes. Lingering political uncertainty may also weaken the yen and push up import costs, some analysts say, adding to mounting price pressures that conflict with the Bank of Japan's current approach to stand pat until the political storm calms. The rising cost of living was among factors that led to the bruising defeat of Prime Minister Shigeru Ishiba's ruling coalition in upper house elections…”
July 21 – Financial Times (Andy Haldane): “The only thing central banks fear more than a bout of inflation is an era of fiscal dominance. This is one in which governments’ budgetary needs begin to dictate monetary policy outcomes, either through direct financing of fiscal deficits or artificially low interest rates… Economists Thomas Sargent and Neil Wallace first explored the well-named ‘unpleasant’ dilemma in 1981. While bouts of inflation tend to be temporary, an era of fiscal dominance poses an existential threat to central banks’ independence and inflation control. When monetary policy is set to meet fiscal ends, central banks become piggy banks.”
July 20 – Financial Times (Kenza Bryan): “A senior central banker has defended supervisors’ work on climate change after attacks from the US, and warned officials had previously ‘completely underestimated’ the risks rising temperatures pose to the financial system. Central bankers are ‘non-political animals’ and ‘pure technocrats’ who simply follow their ‘job description’ when they work on climate change, said Sabine Mauderer, deputy governor of the Bundesbank... ‘In this regard it is natural that if you see a growing risk, a growing financial risk, that the interest of the central bankers is increasing,’ she said…”
Europe Watch:
July 24 – Bloomberg (Mark Schroers): “The euro area’s private sector grew at the quickest pace since last August as a three-year manufacturing downturn nears an end and the services sector gathers momentum… The Composite Purchasing Managers’ Index compiled by S&P Global rose to 51 in July from 50.6 in June… Analysts had predicted a reading of 50.7. While manufacturing continued its recovery in line with expectations, recording its highest reading since July 2022 to close in on an exit from contractionary territory, services saw a surprisingly strong increase to 51.2.”
Japan Watch:
July 23 – Bloomberg (Yoshiaki Nohara and Erica Yokoyama): “Embattled Japanese Prime Minister Shigeru Ishiba denied media reports that he is set to announce his resignation, in an apparent bid to extend his premiership despite an election setback earlier in the week. The speculation over Ishiba’s future mounted quickly after President Donald Trump’s sudden announcement of a relatively favorable trade deal with Japan early Wednesday morning in Tokyo.”
July 21 – Financial Times (Leo Lewis and Harry Dempsey): “After an election that has reduced Japan’s Liberal Democratic party to its weakest parliamentary position in 70 years, Prime Minister Shigeru Ishiba vowed to remain in office to protect the country’s politics from instability. Many suspect, however, that he has guaranteed months of turmoil. Ishiba’s party, which has governed Japan for all but a few years since 1955, has lost its majority in the lower and upper houses of parliament… His tenure catches the LDP at a vulnerable moment: its traditional rural support base is ageing and shrinking, and younger Japanese voters have proved more susceptible to online campaigning and social media populism than the party’s grandees anticipated.”
Leveraged Speculation Watch:
July 22 – Bloomberg (Ruth Carson, David Finnerty, and Takahiko Hyuga): “The yen carry trade that crashed and burned last year may end up being one of the biggest beneficiaries of Japan’s seismic election result. The popularity of the strategy, which involves borrowing the relatively low-yielding yen and investing in other currencies offering higher returns, is growing following the vote in which Prime Minister Shigeru Ishiba lost his upper-house majority, investors say. That’s because the situation may compel Ishiba to open the government’s purse strings to appeal to opposition parties, while the political uncertainty may also convince the Bank of Japan to slow down interest-rate hikes, both of which are negative for the local currency.”
July 21 – Bloomberg (David Ramli): “One of Singapore’s longest-running hedge funds, New Silk Road Investment Pte, is shutting down after weak returns and a pullback by US investors in Asia… The firm, started by two finance veterans about 16 years ago, saw assets under management plummet to $615 million as of December, from almost $2 billion as recently as 2021. The closing comes as smaller hedge funds face increasingly tough conditions…”
Social, Political, Environmental, Cybersecurity Instability Watch:
July 22 – Axios (Sam Sabin): “A critical flaw in a major Microsoft document storage tool is hitting the organizations least able to defend themselves, security researchers and incident responders tell Axios. Schools, hospitals and government agencies are ‘sitting ducks’ as they determine whether their servers have even been affected, one security executive said. Hackers are rushing into the breach, including groups linked to the Chinese government. Microsoft warned over the weekend of ‘active attacks’ targeting a ‘zero-day’ vulnerability in its on-premise SharePoint server. Today, the company said it has observed at least three China-based hacking groups, including two tied to the government, exploiting the vulnerability since as early as July 7.”
July 22 – Financial Times (Rafe Uddin and Demetri Sevastopulo): “Microsoft has accused Chinese state-sponsored groups of exploiting its SharePoint document management software to target users including large corporations and government agencies. The US software giant said on Tuesday that two groups — Linen Typhoon and Violet Typhoon — had exploited a so-called spoofing vulnerability to attack servers used by Microsoft customers. Another China-based group, Storm-2603, was also found to have exploited these vulnerabilities.”
July 23 – Bloomberg (Ryan Gallagher): “The number of companies and organizations compromised by a security vulnerability in Microsoft Corp.’s SharePoint servers is increasing rapidly, with the tally of victims soaring more than six-fold in a few days, according to one research firm. Hackers have breached about 400 government agencies, corporations and other groups, according to estimates from Eye Security… The security firm said that most of the victims are in the US, followed by Mauritius, Jordan, South Africa and the Netherlands.”
July 23 – Bloomberg (Ari Natter): “The US agency responsible for maintaining and designing the nation’s cache of nuclear weapons was among those breached by a hack of Microsoft Corp.’s SharePoint document management software, according to a person with knowledge… No sensitive or classified information is known to have been compromised in the attack on the National Nuclear Security Administration, said the person…”
July 24 – Bloomberg (Danielle Bochove): “The world’s oceans experienced a staggering amount of warming in 2023, as vast marine heat waves affected 96% of their surface, breaking records for intensity, longevity and scale, according to a new study. That could mark a turning point in the way the oceans behave, potentially signaling a tipping point after which average sea temperatures will be reset higher and some ecosystems may not recover, say the authors of the study, which was published… in the journal Science.”
July 21 – Bloomberg (Joe Wertz, Paul Tugwell, and Alberto Brambilla): “Blistering heat is sweeping across southeast Europe this week, triggering weather alerts and stressing power grids. A high-pressure system is feeding in a stream of hot air from North Africa, where temperatures in Tunisia are forecast to reach 47C (117F) on Monday. Southern Italy faces high wildfire risks, while highs in Sicily are expected to hit 43C.”
Geopolitical Watch:
July 24 – Bloomberg (Patpicha Tanakasempipat): “A long-simmering border dispute between Thailand and Cambodia escalated to deadly violence on July 24 as their military forces clashed at multiple spots. Both sides have claimed the other was the aggressor… There were reports of gunfire and artillery shelling, and Thailand dispatched F-16 fighter jets to attack Cambodian army bases… The flare-up is part of a broader disagreement with origins stretching back more than a century and involves parts of a region known as the Emerald Triangle, where the boundaries of Thailand, Cambodia and Laos meet.”
The S&P500 gained 1.5% (up 8.6% y-t-d), and the Dow added 1.3% (up 5.5%). The Utilities increased 0.6% (up 11.9%). The Banks gained 1.6% (up 14.6%), and the Broker/Dealers added 0.2% (up 29.3%). The Transports jumped 3.2% (up 3.0%). The S&P 400 Midcaps rose 1.5% (up 3.1%), and the small cap Russell 2000 increased 0.9% (up 1.4%). The Nasdaq100 gained 0.9% (up 10.8%). The Semiconductors fell 1.5% (up 13.4%). The Biotechs rallied 2.6% (up 0.3%). While bullion fell $13, the HUI gold index rallied 5.1% (up 60.6%).
Three-month Treasury bill rates ended the week at 4.2425%. Two-year government yields increased five bps to 3.92% (down 32bps y-t-d). Five-year T-note yields added a basis point to 3.96% (down 42bps). Ten-year Treasury yields slipped three bps to 4.39% (down 18bps). Long bond yields fell six bps to 4.93% (up 15bps). Benchmark Fannie Mae MBS yields dipped three bps to 5.64% (down 20bps).
Italian 10-year yields were unchanged at 3.55% (up 3bps y-t-d). Greek 10-year yields added a basis point to 3.39% (up 18bps). Spain's 10-year yields were unchanged at 3.31% (up 25bps). German bund yields increased two bps to 2.72% (up 35bps). French yields dipped a basis point to 3.39% (up 19bps). The French to German 10-year bond spread narrowed three to 67 bps. U.K. 10-year gilt yields declined four bps to 4.64% (up 7bps). U.K.'s FTSE equities index gained 1.4% (up 11.6% y-t-d).
Japan's Nikkei 225 Equities Index surged 4.1% (up 3.9% y-t-d). Japanese 10-year "JGB" yields jumped six bps to 1.61% (up 50bps y-t-d). France's CAC40 added 0.2% (up 6.1%). The German DAX equities index slipped 0.3% (up 21.6%). Spain's IBEX 35 equities index rose 1.8% (up 22.8%). Italy's FTSE MIB index gained 1.0% (up 19.1%). EM equities were mixed. Brazil's Bovespa index was little changed (up 11.0%), while Mexico's Bolsa index rallied 1.9% (up 15.8%). South Korea's Kospi added 0.3% (up 33.2%). India's Sensex equities index declined 0.4% (up 3.8%). China's Shanghai Exchange Index gained 1.7% (up 7.2%). Turkey's Borsa Istanbul National 100 index jumped 2.7% (up 8.3%).
Federal Reserve Credit declined $3.0 billion last week to $6.612 TN. Fed Credit was down $2.278 TN from the June 22, 2022, peak. Over the past 306 weeks, Fed Credit expanded $2.885 TN, or 77%. Fed Credit inflated $3.801 TN, or 135%, over the past 663 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $12.4 billion last week to an eight-year low $3.218 TN. "Custody holdings" were down $92 billion y-o-y, or 2.8%.
Total money market fund assets added $9.2 billion to $7.075 TN. Money funds were up $921 billion, or 15.0%, y-o-y.
Total Commercial Paper declined $9.7 billion to $1.395 TN. CP has expanded $307 billion y-t-d and $87 billion, or 6.7%, y-o-y.
Freddie Mac 30-year fixed mortgage rates slipped a basis point to 6.74% (down 4bps y-o-y). Fifteen-year rates fell five bps to 5.87% (down 20bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps 6.83% (down 43bps).
Currency Watch:
For the week, the U.S. Dollar Index declined 0.8% to 97.645 (down 10.0% y-t-d). For the week on the upside, the Swedish krona increased 1.4%, the Mexican peso 1.1%, the euro 1.0%, the New Zealand dollar 0.9%, the Australian dollar 0.9%, the Japanese yen 0.9%, the Swiss franc 0.7%, the South Korean won 0.6%, the Singapore dollar 0.3%, the Brazilian real 0.3%, the Norwegian krone 0.3%, the Canadian dollar 0.2%, and the British pound 0.2%. On the downside, the South African rand declined 0.3%. The Chinese (onshore) renminbi increased 0.07% versus the dollar (up 1.81% y-t-d).
Commodities Watch:
July 21 – Wall Street Journal (Brian Spegele): “China’s thirst for oil drove global demand for decades. Now a government campaign to curb that addiction is nearing a milestone, with national consumption expected to peak by 2027, then begin to fall. Chinese officials have long worried that the U.S. and its allies could hamstring the nation’s economy by choking off its supply of foreign oil. So China has poured hundreds of billions of dollars into weaning itself off the imported stuff... ‘The energy rice bowl must be held in our own hands,’ Chinese leader Xi Jinping has said. Across China, fleets of gas-guzzling Volkswagen and Hyundai taxicabs are being replaced by electric models designed and produced locally. Last year, nearly half of passenger vehicles sold in the country were either all-electrics or plug-in hybrids, compared with 6% in 2020.”
The Bloomberg Commodities Index fell 1.6% (up 4.8% y-t-d). Spot Gold slipped 0.4% to $3,337 (up 27.2%). Silver was unchanged at $38.16 (up 32.0%). WTI crude dropped $2.18, or 3.2%, to $65.16 (down 9%). Gasoline fell 2.6% (up 4%), and Natural Gas sank 12.8% to $3.11 (down 14%). Copper jumped 3.2% (up 44%). Wheat fell 1.5% (down 2%), and Corn dropped 2.2% (down 13%). Bitcoin slipped $700, or 0.6%, to $117,640 (up 25.5%).
Market Instability Watch:
July 22 – Bloomberg (Mia Glass): “Japan’s 40-year government bond auction saw its weakest demand since 2011 amid concerns over government spending and after the US and Japan reached a trade deal. The bid-to-cover ratio… came in at 2.127, compared to 2.214 at the previous auction. The bonds yielded 3.375%, the highest on record.”
July 23 – Bloomberg (Carmen Reinicke and Yiqin Shen): “The latest bout of meme stock mania, in which retail investors are pocketing quick fortunes by piling into heavily-shorted stocks like Kohl’s Corp. and Opendoor Technologies Inc., is likely getting some help from what Wall Street derivatives pros call a gamma squeeze. A gamma squeeze occurs when a rising stock price forces options dealers who have sold call contracts to swiftly adjust their hedges, sending the price even higher. The wild swings can be seen in both directions, as the dealers buy into rallies and sell into reversals. Trading in Opendoor is a good example. The stock price surged more than 300% from July 14 to July 21. On Monday alone, when the shares leaped as much as 120%, more than two million call contracts traded as well. ‘One of the things that happens now is that the market makers adjust options pricing much more rapidly as they see a meme mania is going to happen, tracking Wall Street Bets and other social media platforms,’ said Brent Kochuba, founder of options platform SpotGamma.”
Global Credit and Financial Bubble Watch:
July 24 – Reuters (Mike Dolan): “Amid all the mounting political pressure on the Federal Reserve to resume cutting interest rates, Chair Jay Powell is already overseeing the loosest financial conditions in the U.S. economy since before the central bank started hiking early in 2022… The Chicago Fed's national index of broad financial conditions in the U.S. economy has fallen to its lowest level in more than three years… There are many other indexes of financial conditions, of course, but they mostly tell a similar story. Goldman Sachs’ U.S. equivalent is back down to where it was late last year, just a whisker from its three-year low.”
July 24 – Bloomberg (Ellen Schneider and Olivia Fishlow): “When word spread last week that President Donald Trump is keen to spur more private assets into retirement funds, the biggest direct lenders were more than prepared. In fact, the industry has been laying the groundwork for quite some time. Firms including KKR & Co., Blackstone Inc. and Blue Owl Capital Inc. had already set up partnerships with 401(k) managers. Trade groups and industry executives have also been lobbying officials in Washington and making their case to the public — all part of a long-running effort to expand private credit’s reach. In interviews, executives repeatedly made this point: why should only the elite have access to this type of investment?”
July 24 – Bloomberg: “China’s 30-year government bond auction… drew its highest yield since March, as risk sentiment improved and concerns over further losses cooled demand for debt. The Ministry of Finance sold the 30-year special sovereign notes at an average yield of 1.97% on Thursday…”
July 19 – Bloomberg (Josyana Joshua and Aaron Weinman): “US junk debt investors are piling into the riskiest bonds… Bonds rated in the CCC range have gained 0.75% this month through Thursday, outpacing all other ratings tiers, including investment-grade debt. The highest-rated junk bonds, those in the BB tier, have turned in the worst performance among speculative-grade debt... ‘As investors have become more comfortable, they’ve begun to reach for risk,’ said Robert Tipp, chief investment strategist at PGIM…”
July 24 – Bloomberg (Charles Williams): “Another seven US ABS deals priced Wednesday to bring 2025 primary sales to $212.9 billion. As such, issuance is now only 1.2% lower than at this point last year after being down nearly 9% at the end of the second quarter.”
July 22 – Financial Times (Joseph Cotterill and Alan Livsey): “Investors have pushed borrowing costs for highly rated emerging market governments and companies relative to developed markets to near their lowest levels since the global financial crisis… The premium that investors demand to own investment-grade country and company debt over Treasuries has dropped to 1.04 and 1.1 percentage points, respectively. That marks the tightest level for sovereign spreads since 2007…”
July 22 – Bloomberg (Finbarr Flynn): “President Donald Trump’s unpredictable policy moves are driving investor demand for Asian local-currency bonds… Companies and non-sovereign issuers in Asia Pacific have sold about $1.5 trillion in bonds so far in 2025 in the region’s currencies, a 6% rise and a record for this period… Offerings in the three months from April to June were the highest for any quarter. ‘We are definitely seeing more buyers of local-currency Asian bonds than in pre-April,’ said Daniel Tan, a portfolio manager at Grasshopper Asset Management. ‘There are large inflows from pension and sovereign wealth funds looking to diversify away from dollar assets.’”
Trump Administration Watch:
July 19 – Bloomberg (Kriston Capps): “Allies of President Donald Trump are pressing for an investigation into the ongoing restoration of the Federal Reserve’s headquarters… Any evidence of mismanagement or fraud, as White House officials have suggested, could prove a useful pretext for removing… Powell… But the price tag has less to do with ‘ostentatious’ features than the challenges of building — particularly underground — in what was once a swamp… Foundation work for the Fed expansion was so difficult that contractors responsible for the job received a 2025 award for ‘excellence in the face of adversity’… The ongoing renovation and expansion of the historic 1937 building that houses the Fed, plus an adjacent 1931 federal building, has faced setbacks, with costs for the long-overdue rehab climbing more than 30% since 2023… The project was always going to be tricky… Construction on the Marriner S. Eccles Federal Reserve Board Building and the adjacent Federal Reserve East Building involves adding new office space, removing asbestos and lead and replacing antiquated mechanical systems. Neither the Eccles Building… nor the East Building has ever been fully renovated since they were built nearly a century ago.”
July 24 – Axios (Tal Axelrod and Zachary Basu): “The Trump administration’s feverish push for ‘transparency’ over the 2016 Russia investigation is fast becoming a vehicle for MAGA’s white whale: the potential prosecution of former President Obama. President Trump’s war on his predecessor is dramatically escalating just as he faces new pressure over his handling of the Jeffrey Epstein files.. For MAGA, the new focus on ‘Russiagate’ offers a unifying reprieve — a return to familiar territory where Trump is the victim of a conspiracy, not the subject of one. It's a retribution campaign that’s deeply personal to Trump’s most loyal supporters, and one that could plunge the U.S. into uncharted territory if carried to its extreme conclusion. The two most explosive stories in Washington are unfolding in parallel. Director of National Intelligence Tulsi Gabbard appeared at the White House podium Wednesday to unveil newly declassified documents that she claims expose a ‘treasonous conspiracy’ by Obama-era intelligence officials.”
July 23 – Reuters (Bhargav Acharya): “U.S. President Donald Trump… reiterated his criticism of Federal Reserve Chairman Jerome Powell amid his ongoing call for lower rates, and called on the central bank's board to act. ‘Our Rate should be three points lower than they are, saving us $1 Trillion per year (as a Country). This stubborn guy at the Fed just doesn’t get it — Never did, and never will. The Board should act, but they don’t have the Courage to do so!’ Trump wrote…”
July 22 – New York Times (Colby Smith): “The White House showed no sign of easing its pressure campaign on Jerome H. Powell… President Trump… accused Mr. Powell of being ‘political’ for not voting to cut interest rates this year and ignoring his demands to reduce borrowing costs by around three percentage points. Those decisions have so far been unanimously supported by the Fed’s policy-setting committee. ‘Our economy is so strong now, we’re blowing through everything, we’re setting records,’ the president said... ‘People aren’t able to buy a house because this guy is a numbskull, he keeps the rates too high, and probably is doing it for political reasons.’”
July 23 – Reuters (Alexandra Alper): “U.S. Treasury Secretary Scott Bessent… suggested without evidence that the Federal Reserve's widely followed economic forecasts are motivated by politics, as the Trump administration steps up pressure on the U.S. central bank to cut interest rates. ‘The Fed publishes something called a summary of economic projections, and it’s pretty politically biased,’ Bessent said… President Donald Trump has demanded the Fed deliver an immediate 300 bps rate cut.”
July 23 – Financial Times (Joe Miller and Michael Acton): “The Trump administration plans to vet AI models for ‘ideological bias’ and block companies whose products fail to provide ‘objective truth’ from doing business with the US government. In a policy document…, the administration said it would update procurement rules to exclude developers who did not ensure their systems were impartial. It also vowed to stop federal funding for AI projects from going to states with ‘burdensome AI regulations’.”
July 21 – Financial Times (Edward Luce): “Sagging in the polls? Hurtling towards electoral oblivion? Canada’s Mark Carney, Australia’s Anthony Albanese and now Brazil’s Luis Inácio Lula da Silva have a fix for you. Get Donald Trump to launch a trade war on your country. Few things rally voters around the flag quicker than a superpower assault on your bottom line. Though the Vatican is no trading entity, America’s first pontiff, Robert Francis Prevost, might also credit Trump with his election. Trump and the late Pope Francis, Pope Leo XIV’s predecessor, were not mutual admirers.”
China Trade War Watch:
July 21 – Bloomberg (Katia Dmitrieva): “President Donald Trump’s effort to target China through its trading partners across global supply chains threatens to erode the country’s growth and most of its exports to the US, according to Bloomberg Economics. China has increasingly relied on third countries for the manufacturing of final products or components… China’s share of total value-added manufacturing of goods destined for the US through countries including Vietnam and Mexico surged to 22% in 2023 from 14% in 2017… If Trump is successful in targeting transshipments via higher levies or supply chain requirements, it would threaten 70% of China’s exports to the US…”
July 20 – Bloomberg: “China boosted shipments of rare earth magnets in June — including to the US — after a global supply squeeze that threatened factory closures and inflamed trade tensions… Flows to the US alone rose to 353 tons, up from just 46 tons. Total shipments were still substantially lower than before Beijing launched export controls in early April.”
July 23 – Bloomberg (Annmarie Hordern and Eric Martin): “US Commerce Secretary Howard Lutnick condemned China’s move to prevent a Commerce Department employee from exiting the country as ‘outrageous behavior,’ and said the Trump administration is working to resolve the situation. ‘He went home and he was arrested, and they’re holding his passport,’ Lutnick said… ‘So I give that to the State Department, and the State Department deals with that. But it is outrageous behavior. It’s just outrageous behavior.’”
July 24 – Financial Times (Zijing Wu and Eleanor Olcott): “At least $1bn worth of Nvidia’s advanced artificial intelligence processors were shipped to China in the three months after Donald Trump tightened chip export controls… A Financial Times analysis of dozens of sales contracts, company filings and multiple people with direct knowledge of the deals reveals that Nvidia’s B200 has become the most sought-after — and widely available — chip in a rampant Chinese black market for American semiconductors.”
Trade War Watch:
July 22 – Reuters (Leika Kihara): “Japan’s trade deal with the U.S. has reduced uncertainty surrounding the economy, the central bank’s deputy governor Shinichi Uchida said, signaling optimism that conditions for resuming interest rate hikes may start to fall in place… ‘It's a very big progress that reduces uncertainty for Japan’s economy,’ Uchida said…, adding that the BOJ will incorporate the deal in its quarterly growth and price projections due at the next policy meeting on July 30-31. ‘Given the receding uncertainty, by definition it can be said that the likelihood of Japan durably achieving 2% inflation has heightened,’ Uchida told a news conference.”
July 25 – Reuters (Makiko Yamazaki and Tamiyuki Kihara): “Japan's government said on Friday that profits from a $550 billion investment package agreed in this week's tariff deal with the U.S. would be split between Japan and the U.S. according to the degree of contributions by each side. The comment from a Japanese government official suggests the investment scheme would involve substantial contributions not just from Japan but also from the U.S. government or companies, though the structure of the scheme remains largely unclear. The White House said earlier this week the U.S. would retain 90% of the profits from the $550 billion U.S.-bound investment and loans that Japan would make in exchange for lower tariffs on auto and other exports to the U.S.”
July 23 – Reuters (Kaori Kaneko): “Japan and the United States agreed to keep the current 50% tariff on steel and aluminium as part of the bilateral trade deal, Japanese public broadcaster NHK reported…”
July 23 – Wall Street Journal (Editorial Board): “The trade deal President Trump announced with Japan… is good news—in the narrow sense that it defuses what could have been an extended tariff war with America’s most important ally in Asia. But if this is winning a trade war, we’d hate to see what losing looks like. Mr. Trump hailed the pact with characteristic modesty as ‘perhaps the largest Deal ever made.’ Details remain sparse, but the core appears to be a Japanese commitment to invest $550 billion in the U.S. while reducing barriers to imports of American agricultural products such as rice. In exchange, Mr. Trump will reduce his ‘reciprocal’ tariffs on Japan to 15% from 25%—including, apparently, on autos. The new tariff rate is good news only as relief from 25%.”
July 23 – Financial Times (Andy Bounds): “The EU and US are closing in on a trade deal that would impose 15% tariffs on European imports, similar to the agreement Donald Trump struck with Japan this week. Brussels could agree to the so-called reciprocal levies to avoid the US president’s threat to raise them to 30% from August 1, three people… told the Financial Times. ‘The Japan agreement made clear the terms of the shakedown,’ said one EU diplomat. ‘Most member states are holding their noses and could take this deal.’ Both sides would waive tariffs on some products, including aircraft, spirits and medical devices, the people said.”
July 21 – Wall Street Journal (Tom Fairless): “The global economy is sailing through this year’s historic increase in tariffs, displaying an unexpected trait: resilience… Global producers brought forward purchases and rerouted goods destined for the U.S. through third-party countries that are subject to lower tariffs. For the most part, households and businesses have continued to spend and invest… The world economy grew at a 2.4% annual rate in the first half of this year, around its longer-term trend, according to JPMorgan. Trade volumes are buoyant, stock markets on both sides of the Atlantic have rebounded to record highs and growth forecasts from Europe to Asia are being raised.”
July 23 – Associated Press (Josh Boak and Alexa St. John): “U.S. automakers worry that President Donald Trump’s agreement to tariff Japanese vehicles at 15% would put them at a competitive disadvantage, saying they will face steeper import taxes on steel, aluminum and parts than their competitors. ‘We need to review all the details of the agreement, but this is a deal that will charge lower tariffs on Japanese autos with no U.S. content,’ said Matt Blunt, president of the American Automotive Policy Council, which represents the Big 3 American automakers… Blunt said… U.S. companies and workers ‘definitely are at a disadvantage’ because they face a 50% tariff on steel and aluminum and a 25% tariff on parts and finished vehicles, with some exceptions for products covered under the United States-Mexico-Canada Agreement that went into effect in 2020.”
July 21 – Politico (Giorgio Leali): “The French government wants Brussels to turn the screws on Washington as transatlantic trade talks head to the wire with no deal in sight. A French official working on trade issues, granted anonymity to discuss sensitive matters, said Paris believes that European negotiators must ‘make it clear that we’re ready to press the red button’ if Donald Trump refuses to agree to acceptable terms. A second French official said that the European Commission should recognize it is dealing with an ally who is ‘raising tensions in a trade war it started.’”
July 20 – Bloomberg (Daniel Carvalho): “Donald Trump’s tariff threat against Brazil over a legal probe into his political ally, former President Jair Bolsonaro, caught the Supreme Court in Brasilia off guard. The top court is in recess during July — not all its judges were even in the country — making it difficult to convene to formulate a response. But as soon as Trump threatened 50% tariffs on Brazil on July 9, a group of justices immediately began discussing a response aimed more at asserting national sovereignty than easing tensions with the US.”
July 22 – Wall Street Journal (Amrith Ramkumar and Gavin Bade): “The Trump administration is using its global trade wars to advance the interests of the U.S. technology industry, seeking to prevent foreign countries from targeting American internet firms. The administration hopes to use the threat of tariffs and access to the U.S. economy to stop multiple countries from imposing new taxes, regulations and tariffs on American tech companies and their products ahead of a self-imposed Aug. 1 deadline…”
Budget Watch:
July 21 – Associated Press (Kevin Freking): “President Donald Trump’s tax and spending law will add $3.4 trillion to federal deficits through 2034, the Congressional Budget Office reported Monday, a slight increase in the projection that takes into account the final tweaks that Republicans made before getting the legislation over the finish line. More than 10 million people will be uninsured under the law in 2034 because of the law…”
July 22 – Bloomberg (Akayla Gardner): “President Donald Trump said he is considering a proposal to end capital gains taxes on home sales in a bid to boost the housing market. ‘We’re thinking about that,’ Trump said… ‘But would also unleash it just by lowering the interest rates. If the Fed would lower the rates, we wouldn’t even have to do that. But we are thinking about no tax on capital gains on houses.’”
Constitution Watch:
July 21 – Associated Press (David Bauder): “President Donald Trump… followed up his lawsuit against The Wall Street Journal over last week’s Jeffrey Epstein story by banishing one of the newspaper’s reporters from Air Force One for an upcoming Scotland trip. The moves reflect Trump’s aggressiveness toward media who displease him — even a media magnate, Rupert Murdoch… Trump filed a $10 billion defamation lawsuit against the Journal and Murdoch on Friday because of the newspaper’s article about a sexually suggestive letter bearing Trump’s name that was included in a 2003 album compiled for alleged sex trafficker Epstein’s birthday.”
July 23 – Bloomberg (Annmarie Hordern): “President Donald Trump said he considered attempting to break up Nvidia Corp. to increase competition in artificial intelligence chips before finding out ‘it’s not easy in that business.’ ‘I said, ‘Look, we’ll break this guy up,’ before I learned the facts here,’ Trump said… Trump said he was told by aides that doing so was ‘very hard’ and that the company held a substantial advantage over all competitors that would take years to overcome. ‘I figured we could go in and we could sort of break them up a little bit, get them a little competition, and I found out it’s not easy in that business,’ Trump added.”
U.S./Russia/China/Europe/Iran Watch:
July 20 – Financial Times (Joe Leahy and Ryan McMorrow): “The US embassy in China has expressed concerns about damage to bilateral relations from exit bans, after Beijing prevented an American commerce department employee from leaving the country. The tensions over exit bans come as the two superpowers are locked in a trade war, and ahead of a potential meeting between US President Donald Trump and Chinese leader Xi Jinping.”
July 24 – Reuters (Laurie Chen, Liz Lee and Xiuhao Chen): “EU-China trade ties have hit a ‘clear inflection point,’ European Commission President Ursula von der Leyen said… in Beijing, capping a tense summit with top Chinese leaders dominated by concerns on commerce and the Ukraine war. Expectations were low for the summit in the Chinese capital marking 50 years of diplomatic ties after weeks of escalating tension and wrangling that led to the duration being abruptly halved to a single day at Beijing's request. ‘We have very frankly and openly raised our concerns...on the trade, investment and geopolitical issues... We have partially identified solutions,’ von der Leyen told a press conference…”
July 22 – Bloomberg (Hadriana Lowenkron): “The US ambassador to NATO said China needed to be ‘called out for their subsidizing’ of Russia’s war in Ukraine as the Trump administration ratchets up its threat to impose tariffs if Moscow does not agree to a peace deal. ‘China thinks they’re fighting a proxy war through Russia, and we’re seeing in some statements by the Chinese government that they want to keep the United States and our allies occupied with this war, so that we can’t focus on our other strategic challenges,’ NATO ambassador Matthew Whitaker said…”
July 21 – Politico (Koen Verhelst): “Russia’s attempts to disrupt German society have grown significantly this year, according to Germany’s military counterintelligence chief. ‘We are talking about a sharp increase in cases of espionage and hybrid measures,’ Martina Rosenberg told… DPA. ‘The approach is more massive and also more aggressive.’ The number of cases where Russian involvement is suspected has doubled over the first half of this year…”
New World Order Watch:
July 21 – Financial Times (Mercedes Ruehl, Henry Foy, Laura Dubois and Joe Leahy): “China is making a concerted effort to expand its influence throughout the UN, taking advantage of Donald Trump’s disdain for multilateralism to place officials and push Beijing’s agenda more aggressively… After cuts to US foreign aid prompted what could be the UN’s most radical restructuring in decades, China has stepped up attempts to fill the vacuum, particularly in the Swiss diplomatic hub of Geneva…”
Middle East Watch:
July 21 – Reuters (Kanishka Singh): “Iranian Foreign Minister Abbas Araghchi told Fox News that Tehran cannot give up on its uranium enrichment program which was severely damaged during the Israel-Iran war last month. Prior to the war, Tehran and Washington held five rounds of nuclear talks mediated by Oman but could not agree on the extent to which Iran should be allowed to enrich uranium… ‘It is stopped because, yes, damages are serious and severe. But obviously we cannot give up (on) enrichment because it is an achievement of our own scientists. And now, more than that, it is a question of national pride,’ the foreign minister told… Fox News…”
AI Bubble Watch:
July 22 – Axios (Scott Rosenberg): “The artificial intelligence industry is getting nothing but green lights in all directions — now it needs to deliver on its promises. AI makers are getting everything they have ever asked for or could possibly want. 1. No limits: More money, energy and resources are flowing into the technology's development than any other industry has ever received in such a concentrated time span. Four companies — Alphabet/Google, Microsoft, Meta and Amazon — expect to spend more than $300 billion this year on AI, while private investors and governments pour hundreds of billions more into AI infrastructure. Public and private projects are rushing to supply the vast energy inputs AI development and use requires. A Pittsburgh summit featuring President Trump last week made clear that the emphasis will be on fossil fuels and nuclear, with little regard for climate concerns or environmental costs. 2. No rules: In the second Trump era, the U.S. has dropped any pretense of trying to erect regulatory guardrails around AI.”
July 23 – New York Times (Kevin Roose): “For much of the last decade, America’s partisan culture warriors have fought over the contested territory of social media — arguing about whether the rules on Facebook and Twitter were too strict or too lenient, whether YouTube and TikTok censored too much or too little and whether Silicon Valley tech companies were systematically silencing right-wing voices. Those battles aren’t over. But a new one has already started. This fight is over artificial intelligence, and whether the outputs of leading A.I. chatbots like ChatGPT, Claude and Gemini are politically biased. Conservatives have been taking aim at A.I. companies for months.”
July 24 – Associated Press (Alexa St. John): “President Donald Trump’s plan to boost artificial intelligence and build data centers across the U.S. could speed up a building boom that was already expected to strain the nation’s ability to power it. The White House released the ‘AI Action Plan’ Wednesday, vowing to expedite permitting for construction of energy-intensive data centers… The plan says to combat ‘radical climate dogma,’ a number of restrictions — including clean air and water laws — could be lifted, aligning with Trump’s ‘American energy dominance’ agenda and his efforts to undercut clean energy.”
July 22 – Wall Street Journal (Patrick Coffee): “Chatbots are becoming the go-to source for online answers for many consumers… An estimated 5.6% of U.S. search traffic on desktop browsers last month went to an AI-powered large language model like ChatGPT or Perplexity, according to Datos… The percentage of traffic that went to browser-based AI search has more than doubled since June 2024, when it was 2.48%, according to Datos… It has more than quadrupled since January 2024, when the figure was just under 1.3%.”
July 21 – Bloomberg (Naureen S Malik): “The biggest US grid has no spare supply for new data centers, meaning project developers will need to start building their own power plants, according to the system’s independent watchdog. ‘There is simply no new capacity to meet new loads,’ said Joe Bowring, president of Monitoring Analytics, which is the independent watchdog for PJM Interconnection, the grid that extends from Washington DC to Chicago. ‘The solution is to make sure that people who want to build data centers are serious enough about it to bring their own generation.’ PJM, which is home to the highest domestic concentration of data centers, is becoming a test case for artificial intelligence’s voracious energy needs.”
July 22 – Financial Times (Alex Rogers, Ian Hodgson, Eva Xiao and Stephen Morris): “Companies and business groups are rushing to influence Washington’s artificial intelligence policies as the industry booms and Donald Trump’s administration seeks to encourage the powerful technology in the US. More than 500 organisations lobbied the White House and Congress on AI between January and June… The lobbying boom over the past two years highlights how the AI industry, which is backed by Big Tech companies and deep-pocketed investors, is looking to shape policy at a time of intense debate about the technology.”
July 22 – CNBC (MacKenzie Sigalos): “OpenAI and Anthropic continue to lead a fundraising bonanza in artificial intelligence, raising historic rounds and stratospheric valuations. But when it comes to finding AI exits for venture firms, the market looks a lot different. AI startups raised $104.3 billion in the U.S. in the first half of this year, nearly matching the $104.4 billion total for 2024, according to PitchBook. Almost two-thirds of all U.S. venture funding went to AI, up from 49% last year, PitchBook said.”
July 18 – Wall Street Journal (Berber Jin, Keach Hagey and Ben Cohen): “Hundreds of employees at one of Silicon Valley’s hottest AI startups gathered in their offices last Friday expecting a celebratory announcement. For months, OpenAI had been talking to Windsurf about buying it for $3 billion, and now it seemed like the rank-and-file were finally getting confirmation that the deal was about to become official… Instead, they learned that Windsurf’s chief executive, Varun Mohan, had left the company to join Google, taking with him a small group of artificial-intelligence researchers and engineers. After hearing the news, some of the staff began to cry. By Monday morning, another twist in the saga would bring those Windsurf employees back to the same room for a second announcement: The rest of their company would be acquired by a rival AI startup. In other words, it was just a typical weekend in Silicon Valley.”
Bubble and Mania Watch:
July 23 – Wall Street Journal (Krystal Hur and Jack Pitcher): “Individual investors are once again loading up on a group of unloved stocks and taking to social media to defend them from the haters and the short sellers. Meet the cast of the meme-stock craze, season two. ‘Let’s goo!!’ a user named Hot-Ticket9440 wrote on a subreddit forum Tuesday as shares of Kohl’s KSS -14.23%decrease; red down pointing triangle, the department-store chain, surged by nearly 40%. ‘Max pain on the shorts buy every dip. Together we strong.’ ‘$OPEN has GameStop vibes written all over it,’ Skip Tradeless wrote Tuesday on X of Opendoor Technologies, the real-estate platform. ‘WE WON’T STOP UNTIL $82!’”
July 24 – Bloomberg (Bernard Goyder): “A measure of Wall Street’s expectations for volatility over the next month hit its lowest level since Feb. 14 on Thursday as stocks traded near all-time highs on solid jobs data. The Cboe Volatility Index, known as the VIX, fell nearly half a point… to an intraday low of 14.95 points… The drop is a sign that some investors who have been betting against the S&P 500 Index are now cutting their losses. Specifically, traders known as vol buyers who own positions that will benefit from a decline in stocks or an increase in volatility, are starting to capitulate. ‘You’re seeing some vol buyers just kind of throw their hands in the air,’ said Kris Sidial, co-chief investment officer at hedge fund The Ambrus Group.”
July 21 – New York Times (Colby Smith): “A cohort of the world’s largest asset managers is leaning harder into the rally in risk assets as US stocks push to fresh highs, defying persistent trade and geopolitical tensions. Firms such as Invesco Ltd., Fidelity International Ltd. and JPMorgan Asset Management are reinforcing bullish bets across technology shares… The high-octane wager is that while President Donald Trump is threatening to disrupt the economic order anew, he will step back from the brink. That’s helping justify risk exposure at a time when valuations are stretched and macro headwinds persist. In a market that rewards conviction and punishes caution, sitting out is starting to look like the riskiest position of all.”
July 19 – New York Times (Ian Frisch): “There’s a new darling on Wall Street: private markets. Because that’s where the party is now. Companies are staying private for longer — the number of publicly traded companies has dropped by nearly half over the past three decades, with nearly 1,500 start-ups worldwide currently boasting a valuation of $1 billion or more — and, according to the global consultancy Bain & Company, private market assets have more than tripled since 2013. The firm expects them to grow twice as fast as public assets in the future, reaching $62 trillion globally by 2034. Historically, private equity investments were accessible only to wealthy and experienced investors. But in recent years, interest has soared among the retail class.”
July 21 – Financial Times (Steve Johnson): “Asset managers are launching active exchange traded funds at a record rate this year… Twice as many active ETFs — which try to make money by veering away from index weightings — as passive tracker ETFs had been launched across the US and Europe this year… In the US, there were now a greater number of active ETFs in existence than their passive peers… While the bulk of the $17tn of assets in ETFs is still held in index-tracking products, the surge in launches nevertheless represents a significant shift…”
July 21 – Bloomberg (Muyao Shen): “Apollo Global Management Inc. has pushed deeper into Wall Street’s digital frontier. Through a novel partnership with Securitize Inc., the $785 billion asset manager is offering crypto-native investors blockchain-based access to one of its private credit strategies — an experiment that has already attracted more than $100 million since launching in January.”
July 21 – Wall Street Journal (Lauren Thomas and Ben Glickman): “Blank-check company Dynamix is merging with another entity to create a new company known as the Ether Machine. The combined company plans to manage over $1.5 billion in ether, the largest cryptocurrency behind bitcoin… Dozens of companies—many of which previously had nothing to do with crypto—have allocated more capital for buying bitcoin, pivoting to a strategy often called ‘bitcoin treasury.’ Michael Saylor of Strategy has led the way, turning his company previously known as MicroStrategy into a holder of dozens of billions of dollars in the token as its price has surged.”
July 21 – Financial Times (Joshua Franklin): “JPMorgan… is exploring lending against clients’ cryptocurrency holdings, in the latest sign that the biggest US banks are endorsing the move of digital assets into the mainstream. The policy would mark a big shift for JPMorgan’s chief executive Jamie Dimon, who eight years ago branded bitcoin a ‘fraud’ that would ‘eventually blow up’ and was only useful for drug dealers and murderers. JPMorgan could start lending directly against crypto assets such as bitcoin and ethereum next year… The move would underscore the extent to which big banks, and the regulated financial industry more broadly, are opening up to closer interaction with cryptocurrencies.”
July 22 – Bloomberg (Anna J Kaiser): “A duplex penthouse at the planned 50-story Waldorf Astoria Residences tower in St. Petersburg, Florida, sold for $27 million, smashing the record for the most expensive condo in the Tampa Bay area.”
Inflation Watch:
July 23 – Bloomberg (Naureen S. Malik): “Businesses and households served by the largest US power grid will spend a record $16.1 billion to ensure electricity supplies amid a massive artificial intelligence-driven demand surge. The payments to generators and other suppliers were set Tuesday at a power auction run by PJM Interconnection LLC, which operates the grid stretching from the Midwest to the mid-Atlantic… The price increase prompted calls from utilities and energy groups to build more generation. The AI boom is spurring the biggest surge in power demand in decades, leading to soaring utility bills and disagreement over which resources are best equipped to satisfy those needs.”
July 20 – Bloomberg (Emma Court): “A 300% spike in Australian lettuce prices. A 50% rise for European olive oil and 80% for US vegetables. Researchers from the Barcelona Supercomputing Center and the European Central Bank have traced back those price jumps to extreme weather they say is linked to climate change… ‘Unprecedented conditions are set to become increasingly common across the world,’ the study’s authors say. ‘At the same time, new records for extreme conditions will continue to be set, further from those to which agricultural production and economic systems are currently adapted.’”
July 21 – Reuters (Aatreyee Dasgupta): “U.S. homebuilders are navigating several headwinds as they approach quarterly earnings reports, including rising costs of construction materials, persistently high interest rates, and concerns that President Donald Trump’s proposed mass deportation efforts could significantly impact the construction industry… Evercore ISI’s July survey revealed the weakest spring selling season since 2019… Costs for homebuilders have been rising in recent years due to post-COVID inflation for materials, while U.S. President Donald Trump’s tariff and immigration policies are adding further costs. ‘(The tariffs) may have an additional material impact on the cost structure of homebuilding in the U.S., perhaps by another 4-10% increase (to the cost of construction) in material alone depending on geographic location and the type of material being sourced,’ said Stuart Siegel, CEO of real estate firm Engel & Völkers’ Americas operations.”
July 21 – CNN (Vanessa Yurkevich): “First it was eggs, now it’s beef. The last time Americans likely noticed spiking prices at the grocery store was when eggs reached record-highs. Since then, egg prices have fallen after the deadly avian flu outbreak was contained and producers built back supply. Now, beef prices are hitting records, rising almost 9% since January…, and retailing for $9.26 a pound. June’s consumer price index showed steak and ground beef prices are up 12.4% and 10.3%, respectively, over the last year.”
July 22 – Bloomberg (Kristina Peterson): “Hershey Co. is raising prices on its candy due to historically high cocoa costs. The… maker of Hershey’s chocolates and Reese’s Peanut Butter Cups told its retailers last week that it would be implementing a roughly double-digit price increase…”
July 21 – Bloomberg (Zoe Tillman): “A US orange juice distributor is suing over President Donald Trump’s move to impose a 50% tariff on Brazil... Johanna Foods Inc. is arguing that Trump’s reasons for the levy increase — including support for Brazil’s former right-wing President Jair Bolsonaro — don’t present ‘unusual and extraordinary’ threats that give him emergency authority to circumvent Congress’ taxing power. The… company estimates that the Brazil tariffs would increase its costs for not-from-concentrate orange juice from Brazil by $68 million over the next 12 months and raise retail costs for consumers between 20-25%. According to the complaint, Brazil supplies more than half of all orange juice sold in the US.”
Federal Reserve Watch:
July 24 – Associated Press (Christopher Rugaber, Josh Boak and Chris Megerian): “After months of criticizing Federal Reserve Chair Jerome Powell, President Donald Trump took the fight to the Fed’s front door…, publicly scorning the central bank chief over the ballooning costs of a long-planned building project. Powell pushed back, challenging the president’s latest price tag as incorrect. Wearing hard hats and grim faces…, Trump and Powell addressed the cameras. Trump charged that the renovation would cost $3.1 billion, much higher than the Fed’s $2.5 billion figure. Powell, standing next to him, shook his head. The Fed Chair, after looking at a paper presented to him by Trump, said the president was including the cost of renovating a separate Fed building… that was finished five years ago.”
July 20 – Wall Street Journal (Brian Schwartz and Nick Timiraos): “Treasury Secretary Scott Bessent in recent days privately laid out his case to President Trump for why he believed Trump shouldn’t try to oust Federal Reserve Chair Jerome Powell… Bessent’s reasons for avoiding a messy dispute over Powell’s final 10 months as Fed chair focused on a few themes: the possible effects on the economy and markets, the prospect that the Fed is already moving toward cutting interest rates later this year, and the likely political and legal obstacles that such a move would face, these people said.”
July 19 – Fortune (Jason Ma): “Federal Reserve Chairman Jerome Powell signaled in 2019 that he would rather go down with the ship than save his own skin and compromise the independence of the central bank… During a House Financial Services Committee hearing in July of that year, Powell was asked by then-Chairwoman Maxine Waters, ‘If you get a call from the president today or tomorrow and he said ‘I’m firing you. Pack up and it’s time to go.’ What would you do?’ ‘Of course I would not do that,’ Powell replied… According to the 2022 book Trillion Dollar Triage by Wall Street Journal reporter Nick Timiraos, he was even more adamant in private… ‘I will never, ever, ever leave this job voluntarily until my term ends under any circumstances. None whatsoever. You will not see me getting in the lifeboat,’ Powell told a reporter in the spring of 2019. ‘It doesn’t occur to me in the slightest that there would be any situation in which I would not complete my term other than dying.’”
July 18 – Yahoo Finance (Jennifer Schonberger): “Chicago Federal Reserve president Austan Goolsbee… expressed support for Jerome Powell and central bank independence…, saying the Fed chair is a ‘totally honorable guy.’ ‘I, as well as a virtual unanimity of economists, believe that central bank independence from political interference is absolutely critical to the operation of the Fed and of the economy,’ Goolsbee said… ‘If you just look at places where they do not have independence for the central bank, inflation is higher, growth is worse, unemployment and the job market do worse, and everyone knows that.’ He added that ‘it pains me to hear people actively discussing whether the central bank should be independent. There’s nothing good can come of discussion like that.’”
July 21 – Financial Times (Colby Smith): “US Treasury secretary Scott Bessent has called for an inquiry into the ‘entire Federal Reserve institution’, in the latest sign of how top Trump administration officials are cranking up pressure on the central bank. ‘What we need to do is examine the entire Federal Reserve institution and whether they have been successful’… Trump last week asked a group of Republican lawmakers whether he should sack Powell, but later clarified that he had no plans to do so unless he needed to ‘leave for fraud’. Bessent later posted on X that, while the independence of the Fed ‘is a cornerstone of continued US economic growth and stability… this autonomy is threatened by persistent mandate creep into areas beyond its core mission’.”
July 23 – Bloomberg (Caitlin Reilly): “House Speaker Mike Johnson said he is ‘disenchanted’ with Jerome Powell, as President Donald Trump attacks the Federal Reserve chairman over frustrations with high interest rates. Asked about whether he would support Trump firing Powell, Johnson, who has strong ties to the president and was in the Oval Office as recently as Tuesday, said he was unclear on the legal authority to dismiss the Fed chief. ‘But I will tell you that I have been, can I use the word disenchanted?’ Johnson said…”
July 21 – Axios (Neil Irwin): “Most of the time, the Federal Reserve makes a profit — creating money out of thin air is a pretty lucrative business — and hands its earnings over to the U.S. Treasury. Not lately. The Fed has had a cumulative net loss of $192 billion over the last two years. It is primarily due to the reality that just as printing money is profitable, sucking money out of the economy to fight inflation can be expensive. Central banks generally view ‘seigniorage,’ the earnings that come from money creation, as a side effect of operations rather than the goal. Over the last two years, the Fed has essentially experienced reverse seigniorage, as it has hiked interest rates and shrunk its balance sheet to reduce inflation.”
U.S. Economic Bubble Watch:
July 24 – Bloomberg (Nazmul Ahasan): “US business activity expanded in July at the fastest rate this year as a strengthening in services more than offset a contraction in manufacturing. The S&P Global flash July composite output index rose to 54.6 from 52.9 last month… The group’s measure of services activity also advanced to the highest level this year… The composite measure of prices paid ticked higher this month. A gauge of prices received also edged up in a sign companies are having success passing along higher materials costs.”
July 24 – Associated Press (Matt Ott): “The number of Americans filing for jobless aid fell for the sixth straight week, hitting the lowest level since mid-April… Jobless claims for the week ending July 19 fell by 4,000 to 217,000. That’s fewer than the 227,000 new applications analysts were expecting… The total number of Americans collecting unemployment benefits for the week of July 12 remained stable, rising by just 4,000 to 1.96 million.”
July 23 – CNBC (Diana Olick): “Mortgage rates rose last week to the highest level in four weeks, but mortgage demand didn’t really move… Applications for a mortgage to purchase a home rose 3% for the week and were also 22% higher than the same week one year ago.”
July 23 – Bloomberg (Michael Sasso): “Sales of previously owned US homes fell in June to a nine-month low as potential buyers continued to bristle at record prices and high borrowing costs. Contract closings decreased 2.7% in June to an annualized rate of 3.93 million… The median sales price increased 2% in June from a year ago to $435,300. Home prices continue to rise even after a recent pickup in inventory. ‘Multiple years of undersupply are driving the record high home price. Home construction continues to lag population growth,’ Lawrence Yun, NAR chief economist, said… Economists at Goldman Sachs said in a recent note that 87% of mortgage holders have rates below current rates, and two-thirds have borrowing costs 2 percentage points below current rates, ‘strongly disincentivizing them from moving.’”
July 24 – Reuters (Lucia Mutikani): “Sales of new U.S. single-family homes increased less than expected in June amid higher mortgage rates, pushing inventory to levels last seen in late 2007… New home sale units rose 0.6% to a seasonally adjusted annualized rate of 627,000 units last month… Sales last month increased 5.1% in the densely populated South. They advanced 6.3% in the Midwest, but plunged 27.6% in the Northeast and dropped 8.4% in the West. The inventory of unsold homes on the market increased to 511,000 units, the highest level since October 2007… At June’s sales pace it would take 9.8 months to clear the supply of new houses on the market…”
July 24 – Bloomberg (Alexandre Tanzi): “Paychecks for more than 40% of American workers are lagging the rate of inflation, and it’s likely middle- and lower-earners who are getting squeezed, according to job-search firm Indeed. Overall US pay growth as measured by the Indeed Wage Tracker is still running ahead of inflation, but the gap has shrunk to the smallest it’s been in 12 months…”
July 21 – Reuters (Michael S. Derby): “U.S. households fared far better when applying for credit for mortgage refinancing or auto loans in June, new figures on credit access from the Federal Reserve Bank of New York show. The bank said… rejected applications for mortgage refinancing dropped to 15% in June, versus 42% in February, which was the worst rejection-rate month in data that goes back to the fall of 2013. The rejection rate for auto loans also retreated, though less dramatically, to 7% in June from February’s 14%. Overall credit applications and rejection rates during the last year largely remained steady, the bank said.”
China Watch:
July 22 – Bloomberg: “A global selloff in longer-dated bonds has finally spilled over into Chinese debt… Futures on China’s 30-year government securities fell as much as 0.7% on Wednesday to head for the longest run of losses since the contracts were launched in April 2023. Yields on similar-maturity debt in the cash market were on track to rise for a sixth straight session after climbing one basis point to 1.92%.”
July 25 – Bloomberg: “China’s budget deficit climbed to a fresh record in the first half, highlighting intensified government efforts to shore up domestic demand as Donald Trump’s tariffs reduce exports to the US. The broad fiscal gap reached 5.25 trillion yuan ($733bn) in January-June… The shortfall widened 45% from a year earlier.”
July 23 – Bloomberg: “Chinese sovereign wealth fund Central Huijin Investment Ltd. pumped around 197.5 billion yuan ($27.6bn) into exchange-traded funds in the second quarter, pushing back against a stock market rout that followed US President Donald Trump’s tariff announcements.”
July 20 – Financial Times (Thomas Hale and Haohsiang Ko): “Land sales across smaller and less wealthy Chinese cities have fallen to their lowest levels since at least 2011… Data from financial information provider Wind shows the total value of all land transactions in third-tier mainland Chinese cities… fell 4% to Rmb362bn ($50bn) in the first half of this year… The value of land transactions, including for residential, commercial and other uses, slipped to Rmb87bn in fourth-tier cities and Rmb51bn in fifth-tier cities — both also the lowest since Wind began compiling the data series in 2011.”
July 23 – Bloomberg (Alan Wong): “Hong Kong police arrested an 18-year-old on suspicion he left what they called ‘seditious’ messages in a bathroom, adding to a recent series of national security actions that signal authorities’ continued efforts to curb dissent.”
Central Banker Watch:
July 24 – Axios (David McHugh): “The European Central Bank left interest rates unchanged… Bank President Christine Lagarde said the current economic environment and the potential impact of higher tariffs was ‘exceptionally uncertain.’ Higher tariffs could slow investment, growth and inflation - or they could be inflationary by disrupting existing supply chains for parts and raw materials.”
July 21 – Reuters (Leika Kihara): “Japan’s election outcome may put the central bank in a double bind as prospects of big spending could keep inflation elevated while potentially prolonged political paralysis and a global trade war provide compelling reasons to go slow on rate hikes. Lingering political uncertainty may also weaken the yen and push up import costs, some analysts say, adding to mounting price pressures that conflict with the Bank of Japan's current approach to stand pat until the political storm calms. The rising cost of living was among factors that led to the bruising defeat of Prime Minister Shigeru Ishiba's ruling coalition in upper house elections…”
July 21 – Financial Times (Andy Haldane): “The only thing central banks fear more than a bout of inflation is an era of fiscal dominance. This is one in which governments’ budgetary needs begin to dictate monetary policy outcomes, either through direct financing of fiscal deficits or artificially low interest rates… Economists Thomas Sargent and Neil Wallace first explored the well-named ‘unpleasant’ dilemma in 1981. While bouts of inflation tend to be temporary, an era of fiscal dominance poses an existential threat to central banks’ independence and inflation control. When monetary policy is set to meet fiscal ends, central banks become piggy banks.”
July 20 – Financial Times (Kenza Bryan): “A senior central banker has defended supervisors’ work on climate change after attacks from the US, and warned officials had previously ‘completely underestimated’ the risks rising temperatures pose to the financial system. Central bankers are ‘non-political animals’ and ‘pure technocrats’ who simply follow their ‘job description’ when they work on climate change, said Sabine Mauderer, deputy governor of the Bundesbank... ‘In this regard it is natural that if you see a growing risk, a growing financial risk, that the interest of the central bankers is increasing,’ she said…”
Europe Watch:
July 24 – Bloomberg (Mark Schroers): “The euro area’s private sector grew at the quickest pace since last August as a three-year manufacturing downturn nears an end and the services sector gathers momentum… The Composite Purchasing Managers’ Index compiled by S&P Global rose to 51 in July from 50.6 in June… Analysts had predicted a reading of 50.7. While manufacturing continued its recovery in line with expectations, recording its highest reading since July 2022 to close in on an exit from contractionary territory, services saw a surprisingly strong increase to 51.2.”
Japan Watch:
July 23 – Bloomberg (Yoshiaki Nohara and Erica Yokoyama): “Embattled Japanese Prime Minister Shigeru Ishiba denied media reports that he is set to announce his resignation, in an apparent bid to extend his premiership despite an election setback earlier in the week. The speculation over Ishiba’s future mounted quickly after President Donald Trump’s sudden announcement of a relatively favorable trade deal with Japan early Wednesday morning in Tokyo.”
July 21 – Financial Times (Leo Lewis and Harry Dempsey): “After an election that has reduced Japan’s Liberal Democratic party to its weakest parliamentary position in 70 years, Prime Minister Shigeru Ishiba vowed to remain in office to protect the country’s politics from instability. Many suspect, however, that he has guaranteed months of turmoil. Ishiba’s party, which has governed Japan for all but a few years since 1955, has lost its majority in the lower and upper houses of parliament… His tenure catches the LDP at a vulnerable moment: its traditional rural support base is ageing and shrinking, and younger Japanese voters have proved more susceptible to online campaigning and social media populism than the party’s grandees anticipated.”
Leveraged Speculation Watch:
July 22 – Bloomberg (Ruth Carson, David Finnerty, and Takahiko Hyuga): “The yen carry trade that crashed and burned last year may end up being one of the biggest beneficiaries of Japan’s seismic election result. The popularity of the strategy, which involves borrowing the relatively low-yielding yen and investing in other currencies offering higher returns, is growing following the vote in which Prime Minister Shigeru Ishiba lost his upper-house majority, investors say. That’s because the situation may compel Ishiba to open the government’s purse strings to appeal to opposition parties, while the political uncertainty may also convince the Bank of Japan to slow down interest-rate hikes, both of which are negative for the local currency.”
July 21 – Bloomberg (David Ramli): “One of Singapore’s longest-running hedge funds, New Silk Road Investment Pte, is shutting down after weak returns and a pullback by US investors in Asia… The firm, started by two finance veterans about 16 years ago, saw assets under management plummet to $615 million as of December, from almost $2 billion as recently as 2021. The closing comes as smaller hedge funds face increasingly tough conditions…”
Social, Political, Environmental, Cybersecurity Instability Watch:
July 22 – Axios (Sam Sabin): “A critical flaw in a major Microsoft document storage tool is hitting the organizations least able to defend themselves, security researchers and incident responders tell Axios. Schools, hospitals and government agencies are ‘sitting ducks’ as they determine whether their servers have even been affected, one security executive said. Hackers are rushing into the breach, including groups linked to the Chinese government. Microsoft warned over the weekend of ‘active attacks’ targeting a ‘zero-day’ vulnerability in its on-premise SharePoint server. Today, the company said it has observed at least three China-based hacking groups, including two tied to the government, exploiting the vulnerability since as early as July 7.”
July 22 – Financial Times (Rafe Uddin and Demetri Sevastopulo): “Microsoft has accused Chinese state-sponsored groups of exploiting its SharePoint document management software to target users including large corporations and government agencies. The US software giant said on Tuesday that two groups — Linen Typhoon and Violet Typhoon — had exploited a so-called spoofing vulnerability to attack servers used by Microsoft customers. Another China-based group, Storm-2603, was also found to have exploited these vulnerabilities.”
July 23 – Bloomberg (Ryan Gallagher): “The number of companies and organizations compromised by a security vulnerability in Microsoft Corp.’s SharePoint servers is increasing rapidly, with the tally of victims soaring more than six-fold in a few days, according to one research firm. Hackers have breached about 400 government agencies, corporations and other groups, according to estimates from Eye Security… The security firm said that most of the victims are in the US, followed by Mauritius, Jordan, South Africa and the Netherlands.”
July 23 – Bloomberg (Ari Natter): “The US agency responsible for maintaining and designing the nation’s cache of nuclear weapons was among those breached by a hack of Microsoft Corp.’s SharePoint document management software, according to a person with knowledge… No sensitive or classified information is known to have been compromised in the attack on the National Nuclear Security Administration, said the person…”
July 24 – Bloomberg (Danielle Bochove): “The world’s oceans experienced a staggering amount of warming in 2023, as vast marine heat waves affected 96% of their surface, breaking records for intensity, longevity and scale, according to a new study. That could mark a turning point in the way the oceans behave, potentially signaling a tipping point after which average sea temperatures will be reset higher and some ecosystems may not recover, say the authors of the study, which was published… in the journal Science.”
July 21 – Bloomberg (Joe Wertz, Paul Tugwell, and Alberto Brambilla): “Blistering heat is sweeping across southeast Europe this week, triggering weather alerts and stressing power grids. A high-pressure system is feeding in a stream of hot air from North Africa, where temperatures in Tunisia are forecast to reach 47C (117F) on Monday. Southern Italy faces high wildfire risks, while highs in Sicily are expected to hit 43C.”
Geopolitical Watch:
July 24 – Bloomberg (Patpicha Tanakasempipat): “A long-simmering border dispute between Thailand and Cambodia escalated to deadly violence on July 24 as their military forces clashed at multiple spots. Both sides have claimed the other was the aggressor… There were reports of gunfire and artillery shelling, and Thailand dispatched F-16 fighter jets to attack Cambodian army bases… The flare-up is part of a broader disagreement with origins stretching back more than a century and involves parts of a region known as the Emerald Triangle, where the boundaries of Thailand, Cambodia and Laos meet.”