Mid-Week Update

March 11, 2025

As promised, a quick update and the full book of charts further below for paying subscribers.

The wild ride continues, and the narratives are shifting by the day. Recession fears are on the rise, something I have been positioning for. Now that markets have come around to my original hypothesis, risk/reward doesn’t look as compelling. A recession is a lengthy process. While I can’t exclude such a possibility, I think the pretty decent equity drawdown should ultimately fizzle out over the coming weeks as Trump and his team will realise that they are possibly causing too much carnage. Imagine all his golf buddies giving him grief at the clubhouse.

Damage, however, has been done, and this will be visible in data over the coming few months. At best, the Fed will wait and see all effects, including all the tariff impact, which is still yet to be assessed. If Trump doesn’t move from his stance, and I think that’s a 50% probability, then we will probably see more pain. He is, however, also playing with fire. What I mean by that is that should he sharply u-turn on some of his ideas, markets will lose confidence in his leadership.

The worst-case scenario, I think, would be if risk assets continue to draw down with softening data but sticky inflation, making it hard for the Fed to stimulate just when the economy and markets most need it. I hope we don’t get to that point, but it is totally possible.

While we are all sharply focused on Trump and the US equity drawdown, it is worth highlighting that quite sizeable macro shifts are still in play elsewhere. If the US really caught a recessionary bug, global, much weaker economies would soon follow. Germany’s fiscal package is continuing to propel the EUR higher alongside European bond yields. Curves are steepening, but so far, this doesn’t cry out of much risk aversion. Similarly, Japanese government bond yields are marching higher still. The resulting USD weakness is the reflection of softer US data and domestic risk-aversion plays vs the rest of the world, which has finally found a better growth footing and is considering fiscal expansion. The SEK (Swedish Krona) is always a good bellwether of global growth, and as such, the currency rally (also benefitting from positive Ukraine news) is not reflective of global growth concerns.

Remember, macro (which is always global by nature) is about looking at all moving components at the same time. Sure, the US is a big driver of overall market impulses, both in rates and equities, but sometimes, the story that matters is found elsewhere.

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Let’s now read some of Macro D’s thoughts before going through the 250+ chart pack.

Remember, stay nimble out there.