Tectonic shift

According to the WSJ, J Powell used the word “wait” 22 times yesterday during the press conference after leaving rates unchanged. No surprises, and if anything, the message that investors can extract from his comments is that we may not get any rate cuts in 2025. Unless we need them. If and when we need them, will be dictated by what happens with tariffs. And the chief trade negotiator on the U.S. corner against China will be Scott Bessent, which has an scheduled weekly breakfast with J Powell. He will likely get first hand information on those conversations. The fact that 1Q25 GDP was negative? Not important. Inflation above 2% and expected upward price pressures? Not relevant. Everything seems to be focused on trade. And rightfully so. This is a global tectonic shift that can create economic earthquakes, and create big winners and losers. As you can see in the chart below, the U.S. trade deficit with China is roughly $300Bn, but the U.S. corporate revenues linked to China are $1.2tn. This is the largest leveraged “trade” the world has ever seen. If we get it wrong, we will not be talking about 25 bps cuts, we’ll be talking about hundreds of points and reinstatement of QE. This is not a prediction, it’s just an attempt to measure the size of the solution needed for the problem at hand.

Want to know more? You can find all our posts at https://www.myfundamental.net/insights

#iamfundamental #soyfundamental #wealthmanagement #familyoffice #financialadvisor #financialplanning

#policymistake #ratecut #stagflation