Happy 4th of July to my dear American friends, hopefully celebrating a joyous weekend with your loved ones. I will keep today’s post brief. Aside from a better-than-expected payrolls print, there is not much really to talk about from a pure macro perspective. Markets have now priced out any chance for a July Fed rate cut following the strong labour market report. Earlier in the week, markets had interpreted Powell's speech to mean that there was still the tiniest chance for a July hike, which got some people excited. Markets are now pricing in two cuts by year-end (vs two and a half cuts before). Below the G-10 table with what’s currently priced into short-term interest rates.
The focus now shifts back to tariffs, with Trump saying that 10-12 letters could announce the new tariff rates for specific countries in the 10-70% range. The new tariff reality is that 10% is the new minimum, but not the base case for tariffs. With stocks at their highs and volatility low, I sense that the market is somewhat underestimating Trump’s resolve to add more pressure as tariffs are still very much part of his plan and vision. This all comes just as implied volatilities are closing in on their lows. I am preparing myself for a hopefully more action-packed summer.
Another interesting observation was the underperformance of momentum vs value stocks in the US as we entered July. It reminded me of the rotation we saw last year, which is certainly worth keeping an eye on.
Meanwhile, fiscal worries briefly popped back onto the radar as the UK was facing political noise, following speculation that Rachel Reeves would be sacked after she was seen crying in a parliamentary seating. The Pound and UK Gilts got whacked but then recovered on Thursday. It was a stark reminder that the UK is just on the back burner in terms of market narratives at the moment, but that the fiscal story itself hasn’t really changed. Likely tax rises in the autumn budget statement are on the cards.
GBPUSD
UK 10-year Gilts
Meanwhile, my focus is on this long-term chart of US 10-year yields. Politicians want it lower, the popular bond houses want it lower, yet it’s still in a range. I envisage another post in my “When to buy Bonds” series soon. Stay tuned.
Our simple buy-and-hold portfolio, which I have put together at the start of the year, has seen another high mark, now closing in on +14% YTD.
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Let’s now read some of Macro D’s latest thoughts on tariffs and central banks, before we go through all 250+ chart setups across Rates, FX, Commodities, Crypto, Stocks, and ETFs.
Enjoy a fantastic weekend!
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