How To Prepare For Tariff Day

Treść źródłowa

Next week will be crucial for markets as Trump is set to announce (or disappointingly not announce) tariffs.In this piece I will highlight the rationale behind my base case scenario and its impact on markets.Before we do that, I want to share something with you.I am offering a FREE trial to my institutional macro research service!The service includes:Multiple macro research pieces per week;Timely coverage of important events and market implications;Direct access to meIf you are a HNW private investor, a family office or an institutional investor feel free to request a free trial using the link below:FREE Trial to Alf's Institutional Macro ResearchAnd now, back to the article.1. Recent economic data provides Trump with cover to go big on tariffsThe biggest risk Trump runs with tariffs is a bond market insurrection: if investors perceive inflation as too high, tariffs can generate an injection of risk premium that launches bond yields to the moon.In turn this would tighten financial conditions, slow down the economy, hamper Trump’s plans to reduce borrowing costs for the US, and just make him quite unpopular (people hate inflation spikes).Luckily for him, the recently released inflation report suggests core PCE is trending at 2.3% - not bad:Additionally, the latest job market report was encouraging and the control group of retail sales is running at 5.4% - around 2018 levels, when the pre-pandemic economy was considered strong. The economic momentum and a 2.3% trend in core PCE inflation provide Trump cover to go big on tariffs.2. To increase his negotiating power, Trump can …