{"id":1534069,"date":"2025-05-04T22:40:00","date_gmt":"2025-05-05T02:40:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1534069"},"modified":"2025-05-04T22:40:00","modified_gmt":"2025-05-05T02:40:00","slug":"policies-deals-and-vibes","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/policies-deals-and-vibes\/1534069\/","title":{"rendered":"Policies, Deals And Vibes"},"content":{"rendered":"

Policies, Deals And Vibes<\/span><\/p>\n

\n

By Peter Tchir of Academy Securities<\/em><\/p>\n

U.S. stocks finished the week up around 3% (which was in line with markets globally). 10-year Treasury yields finished 7 bps higher, while the 2-year Treasury gyrated from 3.75% to 3.6% and all the way back to 3.83% to finish the week. Much of the move is because we had some clarity on topics discussed in last weekend\u2019s Deep Breaths<\/a>, and Dealpalooza <\/a>prior to that.<\/p>\n

Before we update where we stand, we just wanted to highlight this month\u2019s Around the World<\/a>, where Academy\u2019s Geopolitical Intelligence Group focuses on Israel\/Hamas, U.S. and Iran, Ukraine and Russia, tensions with China, and fighting in the Congo. The last one brings back memories of Academy\u2019s version of We Didn\u2019t Start the Fire <\/a>from October 2023, which actually fits in the \u201cvibes\u201d section quite well.<\/p>\n

Policies<\/h3>\n

There are three policies that matter the most right now:<\/p>\n

Tariffs. <\/strong>Market is pricing in ongoing reductions and delays in implementation. Hoping\/waiting for deals. They may come, but it is possible that the theme of \u201ctariffs as a source of revenue<\/strong>\u201d retakes the lead in the constantly evolving game of what tariffs are meant to do. DOGE hasn\u2019t delivered the savings expected, and with budget negotiations coming up, we might see a shift in focus from the administration (which had been clearly backtracking on the tariffs and global trade war since April 2nd). We may start to see the impact on shipping, freight, and most importantly, store shelves, in the coming weeks as well as some hints about who is expected to pay the tab for the tariffs<\/strong>. Those potential effects do not seem fully priced in here (and might be avoided with deals).
\n\t\u00a0
\n\tFederal Reserve Interest Rate Policy. <\/strong>After Friday\u2019s jobs report (Instant Reaction<\/a>) it would be shocking if the Fed cut rates (market is pricing in 3%). I think the report was likely flawed primarily due to the enormous impact of the birth\/death model on the report (and the ongoing issue of low survey response rates). Could the Fed be a little more dovish, pushing the June meeting from a 35% chance to something higher? That would make some sense, as June is probably my base case. But in the end, expect the Fed to stand still and focus on jobs, selective inflation data (GDP Core PCE, ISM Prices Paid), and policy uncertainty backing their decision. Expect some angry responses from the administration which can easily select some inflation measures that show a different story and can insist that the policies are all working to lower inflation.
\n\t\u00a0
\n\tThe 2026 Budget. <\/strong>This will become increasingly important in the coming days and weeks, as it will become actual legislation as opposed to executive orders. <\/strong>On the surface it is \u201cheavy on austerity.\u201d Unlike in Trump 1.0 (and pretty much in every other administration which all claimed to be somewhat cautious on the deficit but then spent on everything), there is austerity here. That should help interest rates if it looks like the budget can progress without the austerity measures being dramatically reduced <\/strong>(always a possibility in D.C.). It will add some fears about the health of the economy which has become dependent (even overly dependent) on government spending. While Tax Cuts are included, only additional or new tax cuts will really be stimulative. <\/strong>The extension of existing cuts put in place during Trump 1.0 won\u2019t be a boost to the economy since virtually no one is adjusting their spending on the assumption that those won\u2019t be extended. If they don\u2019t get them extended, it will be a big hit, but extending them will\u00a0not be a big stimulus <\/strong>\u2013 so they need to get some new measures incorporated. Early in the process, but negotiations will start to move markets in the coming weeks.<\/strong><\/p>\n

Dealz<\/h3>\n

So far, no official outlines of any deal have been announced.<\/p>\n

India still seems to be a front runner for first deal. <\/strong>We will be looking to see how aggressive the terms of any deal are in order to get a sense of likely future deals as well as their impact. Larger trading partners are the key here and markets will likely ignore deals with smaller or low per capita GDP nations.
\n\t\u00a0
\n\tPotential talks with China helped turn weak futures on Thursday <\/strong>night into strength that only grew after the payroll data hit the tape. A deal with China is key and the market seems optimistic about progress<\/strong>. I am increasingly concerned that the optimism is becoming too great, versus what is likely. I could be wrong, but the headlines coming out of D.C. seem to be going above and beyond the call of duty to make everything seem positive on that front. That might be the case, but it doesn\u2019t ring completely true to me.
\n\t\u00a0
\n\tUkraine Deal. <\/strong>The deal was finally signed. One thing missing from the U.S. perspective is that the money\/profits will be used towards paying for future aid and are not being used to pay for aid already given<\/strong>. That had been a feature of the deal that did not get incorporated. It seems highly likely that any country negotiating with the U.S. will notice that important shift and negotiate harder than they would have otherwise. With no troops on the ground and presumably a lag between getting this deal signed and any serious presence in the region trying to extract these resources, there is plenty of \u201copportunity\u201d for Russia to continue to attack. Yes, once American companies and workers are there, it will be a deterrent, but that could take some time <\/strong>(especially since I have yet to find a commodity person overly excited about the deal \u2013 it could be that I haven\u2019t looked hard enough, or it could be that this is similar to what is in Greenland and the commercial viability is limited). It will be interesting to see how the deal plays out over time, but for now, it is difficult to get too excited about it from either side\u2019s perspectives.<\/strong><\/p>\n

Expect more deal headlines, and hopefully, the outline of an actual deal. I do think that we need to be cautious about \u201cChina deal progress\u201d headlines. While I\u2019m not sure what to make of it, the fact that Japan seemed to threaten Treasury holding reductions was also interesting <\/strong>(not in a good way).<\/p>\n

Vibes<\/h3>\n

The U.S. has now apparently impacted elections in Canada and Australia. <\/strong>Not sure what that means, but it is curious to think about as we all try to figure out what the world will look like in the coming years. I do think it is another warning about the American Brand (which will affect sales of American products overseas, and not in a good way).<\/p>\n

Israel ramping up in Gaza and the Houthis launching successful attacks <\/strong>after being pounded by the U.S. for the past few weeks is also concerning. A nuclear deal with Iran would be great, but much like the situation between Russia\/Ukraine, the risk of more violence in the region seems to be increasing <\/strong>even as talks are ongoing.<\/p>\n

China is interfering with the Philippines\u2019 territorial claims. <\/strong>It seems crazy that things could escalate over reefs and shoals, but crazier things have happened.<\/p>\n

While I look at a lot of data, I think I can safely say, in my 30+ years in the business, I have never looked at the Taiwan dollar \u2013 well, now I have.<\/strong><\/p>\n

<\/a><\/p>\n

An extreme move. It has had other large moves (though nothing quite as aggressive), but the fact that it is happening in the midst of a growing trade war, and heightened tensions, makes me nervous.<\/p>\n

India and Pakistan, which wasn\u2019t high on our risk radar last week, is becoming increasingly so.<\/p>\n

The People\u2019s Armed Forces Maritime Militia (PAFMM) is something I fear we will all learn a lot more about this year. It completely fits into the Gray Zone of warfare that Academy has been harping on (cyber, cable cutting, etc.). This fleet could be used to disrupt trade in and around the South China Sea. It could be used as a way to increase the chances of an \u201caccident\u201d occurring that risks escalation.<\/strong><\/p>\n

Lots of weird things going on that, at least for me, create this unpleasant vibe (almost like when the sky turns a weird color and the wind dies down right before the storms rages in intensity).<\/p>\n

Bottom Line<\/h3>\n

Rates and risk assets will continue to be headline driven<\/strong>. Policies and deals will take their turns driving markets.<\/p>\n

On the bright side, the pivot from less aggression on tariffs, the indications of some cooling with China, and getting the budget going are all positives <\/strong>(I\u2019d like to see more aggressive measures taken to help the chip industry, biotech, and the processing\/refining of commodities).<\/p>\n

But with the Fed unlikely to help, a lot has already been priced in.<\/p>\n

We\u2019ve argued since the start of Trump 1.0, that Trump is willing to pivot and shift his direction. But that also tends to mean that whenever things are really good, be cautious (like in January), and whenever things are really bad, they can change (like in April).<\/strong><\/p>\n

I wish we had more clarity on the direction of policy and deals and weren\u2019t surrounded by all of these \u201cvibes,\u201d but we are. I\u2019m less optimistic than at the start of last week (markets moved and more is being priced in), but have to remain nimble as the headlines could come out in any direction (I\u2019m leaning\u00a0towards the negative, but am by no means convinced) and we have to respect what seems like a complete lack of liquidity out there.<\/p>\n

With everyone trading the same headlines, the moves are abnormally large, and I just don\u2019t see that changing yet.
\nGuess that is a long way of saying that I am \u201cneutral\u201d with a slight negative bias on risk and bonds.<\/p>\n

I do think that everyone, and every corporation, will have to remain slightly cautious in their decisions which will put pressure on the economy, especially if we start seeing real signs of disruption from the tariffs that have already been implemented.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSun, 05\/04\/2025 – 18:40<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/economics\/policies-deals-and-vibes<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Policies, Deals And Vibes By Peter Tchir of Academy Securities U.S. stocks finished the week up around 3% (which was in line with markets globally)….<\/p>\n","protected":false},"author":0,"featured_media":1534070,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1534069","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1534069","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1534069"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1534069\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media\/1534070"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1534069"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1534069"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1534069"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}