The UK’s Torygraph Newspaper excelled itself over the weekend, publishing claims the UK is bust and seeking an IMF bailout. Their readership loved it as proof positive the UK is doomed and how terrible the new government is. It undermined the Gilts market, and raised substantial global investor fears over the investibility of the UK. The story was utterly unfounded.
The Fed has fallen. What will negative real yields do the US economy? It will likely further fuel asset speculation and lead to renewed QE as global buyers exit the US bond market. Using inflation to wipe the budget deficit may even be part of the plan. The path ahead looks increasingly fraught. Been here before.
The next few days could set the future of capitalism if Putin continues to successfully divide the Western Economies. Meanwhile, the hit show of the Edinburgh Festival is a timely reminder its people that create financial crises, and the naked pursuit of wealth was never the vision of Adam Smith, the founder of modern economics.
I am notionally on holiday this week, but it struck me Trump’s latest succession of “flooding the space” announcements is just flow in the on-going madness of markets and politics. I’ve loaded Catch-22 into my kindle to re-read in search of insights on what might come next.
Friday August 1st might go down in history as the day the US Treasury Market died. There was an art to reading US Data. It relied on trust. Now that is broken – if you can’t trust the data, what can you trust? Other govt bond markets are available.
Donald Trump has made an example out of Canada: a 35% tariff rate will show these damn Canadians! Probably a mistake. He reminded the world how capricious he is. It will remind markets that Trump and certainty don’t go hand in hand. It leaves the UK in an embarrassing spot.
While Trump fumes at Jay Powell for not slashing rates, Scott Bessent is the adult-in-the-room minding the Fed isn’t too battered by the President’s harangues. No doubt they chat about the structure of the market and the rising risks to it – including stablecoins.
The Market Commentariat feared the worst when Trump took office. Liberation Day confirmed their worst fears – global market and economic meltdown on trade mayhem seemed inevitable. But Trump has played a blinder of a trade game. He has surprised to the upside. Will it last?
There are times when you have to laugh at the nonsense of it all. From a delusional, fantastical market to a blithering, blathering President, what’s not to like about these summer markets…? Er, how about how some great look back earnings hide the coming reality?
“The Atlantic is no longer a pond, but has become an ocean once more.” There are deals and there are deals. Some are good. Some are bad. Some are necessary – but will ultimately change everything. The US/Europe trade deal – much like the deals struck with the UK and Japan – is better than the alternative of no-deal, but at heart it’s a bad deal. There will be consequences.
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