A tariff induced selloff in tech mega caps drove equities lower. Copper surged to a record high as the Administration is threatening a tariff on this key industrial metal for AI.
On the other hand, both energy and big banks again rose. A measure of big banks rose for a ninth straight day, the longest rally since 2006 as per Bloomberg.
In some regards, this big bank rally is contra to the emerging prevailing wisdom that a recession may be possibly imminent by the end of the year. Recessions traditionally increase bank’s non-performing assets which in return impair earnings, capitalization and lending ability.
There was also some concern about a warning from the CBO that the Treasury risks a default as soon as August if the debt ceiling is not raised. There is a vast consensus that such default will not occur given the cataclysmic effects of such action.
Again writing the extreme obvious, uncertainty is rising to levels not experienced in a while. The warning from the CBO, warnings that have steep precedents in past debt ceiling deadlines, just added to the uncertainty.
Perhaps a rhetorical question to ask is whether or not the Administration is attempting to use currency devaluing as a method of economic policy…devalue the currency via potential tariff policy to make products more attractive?
The President’s economic advisors, commencing with Treasury Secretary Bessent are extremely versed and knowledgeable about the FOREX markets [buying and selling of one currency for another]. Bessent was a member of Soros Fund Management that made billions via on speculation that the British Pound would collapse.
Bessent spoke at length during his confirmation hearing about a 4% adjustment in the Yuan-Dollar exchange rate to drive demand for US products. This is far too complicated to drive social media headlines. Tariffs declarations drive headlines but perhaps the real goal is currency devaluations.
Radical thought? The old adage of “It is not what you do but rather why you do it” is perhaps appropriate for all actions or inactions.
Commenting about the Treasury market, yields were nominally higher across the spectrum causing a steepening of the curve.
Today the final revision of fourth quarter GDP. The release is typically a non-event but today it appears nothing is really a non-event.
Last night the foreign markets were down. London was down 0.67%, Paris down 0.55% and Frankfurt down 1.0%. China was up 0.15%, Japan down 0.60% and Hang Seng up 0.41%.
Dow and NASDAQ futures are flat and down 0.25%, respectively, as the Administration levied 25% tariffs on auto imports the 10-year is off 9/32 to yield 4.39%.
