Friday Chart Book
March 14, 2025
“Don’t blame a clown for acting like a clown
Ask yourself why you keep going to the circus.”
The above quote came across my desk this week, and it immediately resonated. As much as we can curse and be annoyed at Trump and the administration, we can choose not to constantly pay attention to every word and act he performs. He is a man on a mission, and his mission, while still convoluted in noisy behavioural patterns, should now be clear to pretty much everyone who is paying attention.
Let me spell it out for you in his own words:
“You can’t really watch the stock market. If you look at China, they have a 100-year perspective. We have a quarter. We go by quarters.”
What’s a few quarters or even years of pain if you look at the long horizon? Philosophically, of course, he is right. But even he will have to acknowledge that in his 4 years, he won’t be able to achieve his long-held views.
What are those? He ultimately was voted in to look after the mid to lower-income cohort of society. As such, he will look more after pro-labour than pro-capital policies. That’s quite the shift from his last terms.
Let’s repeat: Trump and Bessent don’t care about your stock portfolio. And Powell doesn’t either, by the way.
In addition, the tariff shenanigans are seemingly just getting started. On Thursday, Trump threatened 200% tariffs on European Wine. That’s going to annoy quite a few people if enacted.
Again, he doesn’t care until he gets what he wants. Maybe his approach is all part of the plan to create maximum uncertainty in businesses and markets. He is succeeding so far. His and Bessent’s goal of reducing the 10-year Treasury rate has somewhat come to a halt. Just as we are looking at new US treasury yield lows in March, Germany announced a defence and infrastructure package to break previous debt rules. That is quite a strong statement for a European fiscally prudent country. The significant increase in Germany's 10-year yields (bunds, blue line below) of around 50 bps stopped the US yield descent (white line).
What now, Mr. President? At this stage, if you want to be serious and statesman-like, you have to continue on your path, or you look like a fool. The quicker the pain comes, the more he can blame it on Biden and co. Wouldn’t you do the same?
Why would any non-US pension fund now decide to keep US investments? I think the writing is on the wall. Previously, the US market was the bastion of growth and great companies. Great companies are still there but are quite overvalued as everyone is in the same trade. That’s nothing new. What’s new, however, is that currency diversification is now running in reverse. Whereas previously, managers were happy holding USD as a diversified asset, this now acts as a double-whammy as US assets and the US Dollar are falling, accentuating capital losses of foreign holders.
Taking it all together means that my macro playbook stays the same; the negative wealth effects will inflict economic pain, visible in the months ahead. A bear market is in sight, but even if identified as such, it can have vicious rallies which can topple your belief system. These times are very damn difficult.
This reminds me of the golden rule of markets:
“They like taking the most complex, irritating and convoluted pathway from point A to point B. Prices may get to your targets, but Mr Market will do its utmost to make sure you are not on board.”
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Let’s now go into more detail and read what my friend Macro D has in store for us. We then scan the multitude of charts I have updated below. 250+ charts, to be more precise.
Let’s go!