In today’s briefing:
- The Sino-American Trade War 2.0: A Preview
- What’s Rattling the Stock Market?
- High Government Borrowing: Nuanced Implications for US Treasuries
The Sino-American Trade War 2.0: A Preview
- An economically weakened China is preparing for Trump’s tariff war with an array of assertive measures in the intelligence, military and trade dimensions.
- We continue to believe Chinese equities are an uninvestable asset class, though traders could profit from swings in that market.
- Investors should consider gold as a de-dollarization play, and possible commitments into tail-risk volatility.
What’s Rattling the Stock Market?
- Markets have taken on a risk-off tone with few satisfactory bearish explanations.
- It’s possible that the combination of rising inflation fears and concerns about the lack of clarity over Trump’s policies is sparking the market’s cautious tone.
- We remain tactically constructive, as technical models with strong historical track records whose study periods include major catastrophic episodes argue that risk and reward are bullishly skewed.
High Government Borrowing: Nuanced Implications for US Treasuries
- The continuation of large budget deficits under the second Trump administration is causing concerns amongst investors about interest rate implications, but Treasury yields are determined by a multitude of factors.
- High government borrowing will typically impart greater stress on financial markets if private sector borrowing is also strong. Long-end yield curve steepening may reflect funding issues due to buyer shortages.
- Current expected returns on Treasuries (both nominal and real) are highly elevated compared to recent history and should offer decent protection for investors.
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