Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Hahahahaha OK then!!!!
For the next 90 days, the US will impose 10-per-cent universal tariffs instead of the “reciprocal” tariffs announced by the White House last week. At least for countries that haven’t retaliated.
China is an especially glaring exception. President Trump announced the pause at the very end of a Truth Social post that was supposedly focused on an increase in tariffs against China to 125-per-cent. That post came less than four hours after President Trump posted that it was “a good time to buy”. ¯\_(ツ)_/¯
In the 90-day pause period, it seems that the US president wants to simply Do Deals with every country in the world. In the interim, the US is imposing an additional universal 10-per-cent tariff, as Treasury secretary Scott Bessent said in a press conference, adding that US officials have a meeting with Vietnam today.
One important issue here: Bessent didn’t answer a reporter’s shouted question about the EU, which voted to approve additional tariffs against the US this morning.
Anyway, the stonks are stonking. The S&P 500 was up almost 8 per cent around 2pm in New York:
And the Nasdaq Composite was ripping, up 9.5 per cent, despite the fact that the back-and-forth tariff fight with China is ongoing.
Most importantly, the shockingly quick Treasury-curve steepener trade we saw over the past few days is reversing itself.
To explain: Treasuries maturing in two years (and less) are more closely linked to near-to-medium-term Federal Reserve policy decisions. Yields have been falling since February, as traders price rising risk of recession and at least Fed “insurance” cuts. Earlier today, the bond market carnage was so severe they were even pricing in the possibility of emergency monetary easing.
On the other hand, the value of longer-dated Treasuries are more dependent on inflation (to simplify, a bond’s principal repayment is worth even less in 30 years if inflation is high).
So the fact that the two-year Treasury yield has soared the most — an eye-popping 30 basis points to the 10-year yield’s ~15 basis points — seems to imply that the near-term doomsday scenario is less of a risk, in markets’ view.
So Great Depression 2 is off, we guess? For now.
But hey! It looks like that Walter Bloomberg has been vindicated. Same goes for the bank trading desks that were circulating the headlines before he did on Monday.
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In the scramble to figure out how exactly “Liberation Day” is going to upend global trade, nuclear errors may occur.
Economists at the Federal Reserve Bank of Richmond released a great chart (covered in mainFT) identifying the sectors that will be most impacted by Trump’s sweeping trade levies.
The first four — leather goods, apparel, furniture, and textile product mills — made a lot of sense. These industries all import heavily from the countries facing the steepest tariffs, like Vietnam, China and Cambodia.
But the fifth item prompted a bit more head-scratching. And when the Richmond Fed kindly provided the underlying data for the chart, they also supplied a clarification for the ages.
PS: we had a typo in one of the industries, instead of “Nuclear Warheads” it should have been “Support Activities for agriculture and forestry.”
You might be wondering how “nuclear warheads” ended up in place of “support activities for agriculture and forestry.” And if you’re developing conspiracy theories about the cover-up of nuke inflation, we’re afraid we must let you down: it seems it really was a typo.
The North American Industry Classification System (NAICS) code for “support activities for agriculture and forestry” is 115. The Product Service Code (PSC) code for “nuclear warheads and warhead sections” is 1115.
As fat-finger errors involving nuclear warheads go, it’s probably one of the better ones.
Feeling a little more relaxed, FT Alphaville started asking the obvious question: what on earth are “support activities for agriculture and forestry”?
Well, according to the Bureau of Labor Statistics, “Industries in the Support Activities for Agriculture and Forestry subsector provide support services that are an essential part of agricultural and forestry production.”
So that’s that all cleared up.
The chart on the Richmond Fed’s website has now been “updated to accurately reflect the proper industries” and the original work has been lost to history. Here’s the disarmed version:
There’s a lot going on in the Treasury market right now, and none of it is good. “Liberation day” seems to have morphed into “liquidation day”.
You might have seen terms like “off the runs”, “basis trades”, “swap spreads” and “omg are we going to die” bandied about over the past few days (including here on Alphaville) and been a little baffled.
We realise that not everyone is quite the fixed income dorks that we are, so here’s an explainer of some of the more common “relative-value” strategies that hedge funds often pursue in the bond market.
This is not the really funky stuff. These are actually fairly plain-vanilla trades that have in some form been around for decades. But quite a few of them were supercharged in the post-crisis era — thanks to the regulation-enforced retreat of banks and the rise of leaner algorithmic market-makers — and all have the potential to blow up rarely but spectacularly (viz LTCM).
If you’re a diligent Alphaville reader then some of this might seem familiar, as we’ve in some places repurposed or adapted previous material from older posts. But we thought it might make sense to gather all this stuff in one simple (ish) explainer, and rewriting everything from scratch felt redundant. As always, let us know in the comments if we’ve gotten something wrong in the process of simplifying things.
Treasury basis trades
This is the one that is most often talked about, as it is one of the longest-established fixed income relative-value trades around — dating at least back to 1979, when Salomon Brothers’ John Meriwether lifted one version out of EF Eckstein, one of the first Treasury futures brokers.
Treasury futures typically trade at a premium to the government bond you can deliver to satisfy the derivatives contract. That’s mostly because they are a convenient way for investors to gain leveraged exposure to Treasuries (you only have to put down an initial margin for the nominal exposure you’re buying). Asset managers are as a result mostly net long Treasury futures.
However this premium opens up an opportunity for hedge funds to take the other side. They sell Treasury futures and buy Treasury bonds to hedge themselves, capturing an almost risk-free spread of a few basis points. Normally, hedge fund managers don’t get out of bed for a few measly bps, but because Treasuries are so solid you can leverage the trade many, many times.
Let’s say you put down $10mn for Treasuries and sell an equal value of futures. You can then use the Treasuries as collateral for, say, $9.9mn of short-term loans in the repo market. Then you buy another $9.9mn of Treasuries, sell an equivalent amount of Treasury futures, and the repeat the process again and again and again.
It’s hard to get firm idea of what is the typical amount of leverage that hedge funds use for Treasury basis trades, but Alphaville gathers that as much as 50 times is normal and up to 100 times can happen. In other words, just $10mn of capital can support as much as $1bn of Treasury purchases.
Here’s a good schematic showing how it all works, from a previous big read on the subject:
And how significant is the trade in aggregate? Well, it’s an imperfect measure for a lot of reasons, but the best proxy for its overall size is the net short Treasury futures positioning of hedge funds, which currently stands at about $800bn, with asset managers the mirror image on the long side.
The problem is that both Treasury futures and repo markets demand much more collateral when there is an unusual amount of volatility in the Treasury market. And if the hedge fund can’t pony up then lenders can seize the collateral — Treasury bonds — and sell them into the market. As a result, it is a major danger lurking inside the market that is supposed to be the financial system’s equivalent of a bomb shelter.
We saw this most memorably in March 2020, when it took almost $1tn of Treasury-purchases by the Federal Reserve to prevent the US government bond market from exploding. We are not nearly there right now, but there’s been a similar “doom loop” of margin calls, liquidation and falling prices in recent days.
Off-the-run trades
Another famous Treasury trade also popularised by LTCM takes advantage of how investors in the US government bond market usually pay a premium for the most recently-issued Treasury bond.
That’s because the freshly-minted Treasury — which is called the “on-the-run” security — is the most liquid. After a few weeks or months of issuance, it tends to settle into accounts at insurance companies, banks or pension plans, where it doesn’t trade as much. It becomes an “off-the-run” Treasury bond.
But inevitably, all on-the-run Treasuries become off-the-run Treasuries eventually, so the price difference can be exploited by hedge funds. They short the freshest Treasury bonds and go long the nearest off-the-run one, which might just be a few months older.
Once a new on-the-run bond emerges, the prices between the two securities should converge. Sometimes we’re talking only a couple of basis points of difference between two very similar Treasuries, but here’s a chart showing the yield difference between Treasuries maturing in nine and 10 years to make it clearer.
As you can see, it can be as low as zero, is usually around 4-5 basis points and has now shot up to nearly 9 basis points (and at the time of writing, US trading hasn’t really gotten under way yet).
Like Treasury basis trades, this only works with enormous dollops of leverage. And because both legs of the trade are supersafe US Treasuries (only the maturity is a little different), prime brokerages at banks will allow a lot of it, just as they do with Treasury basis trades.
Of course, just because the spreads should narrow over time doesn’t mean that they always do. In both LTCM’s 1998 death and in March 2020 the spread between off and on the run securities also ballooned dramatically, as the violence of the volatility forced hedge funds to unwind the trade.
As the Federal Reserve’s minutes from March 15, 2020 noted:
In the Treasury market, following several consecutive days of deteriorating conditions, market participants reported an acute decline in market liquidity. A number of primary dealers found it especially difficult to make markets in off-the-run Treasury securities and reported that this segment of the market had ceased to function effectively.
Again, we’re not seeing anywhere near this turbulence right now, but off-the-run spreads have widened, implying that this could be another contributing factor to the Treasury market sell-off.
Swap spread trades
This is a newer culprit, and one that Alphaville initially discounted as a smaller contributor than the basis trade being unwound. But from our conversations it seems it could actually have been the biggest one so far.
Because of various bits of post-financial crisis regulation, US banks are constrained in how many Treasuries they can hold. Meanwhile, cleared interest rate swaps are less capital-intensive, which has led to swap spreads — the difference between the fixed rate bit of an interest rate swap and the comparable government bond yield — to mostly stay in negative territory for many years.
It has been especially prevalent for longer term swaps. In practice, the negative swap spreads simply reflected the rising cost of storing stuff on banks’ balance sheets. As the Bank for International Settlements said in a report last year:
Negative spreads compensate intermediaries for holding government bonds on their balance sheets and entering swaps as fixed rate payers. Both swap and bond markets are intermediated by bank-affiliated dealers who require remuneration for using their balance sheets and taking on associated risks. When dealers absorb a large amount of bonds, they incur funding costs in the repo market for financing the long bond position.
Additionally, they tend to hedge the interest rate risk by paying the fixed swap rate and receiving the floating rate. When doing so, dealers also need to factor in balance sheet costs from internal risk management and prudential rules, as well as opportunity costs of other uses of their balance sheet capacity.
If these costs are high enough, dealers will recoup them through a negative swap spread. Moreover, if dealer balance sheets are constrained, non-bank players such as hedge funds may need to be incentivised to step in, deploying repo leverage to assume similar positions as dealers.
However, at the start of the year, a lot of people were getting excited by the prospect of the new Trump administration unwinding a lot of the post-crisis regulatory edifice.
And that raised the prospect of negative swap rates suddenly evaporating, as banks would be freed up to hold more Treasuries themselves, or simply have much more balance sheet space to finance hedge funds that wanted to arbitrage the spread.
In February, Barclays estimated that the scrapping of the “supplementary leverage ratio” alone could create about $6tn of “leverage exposure capacity”, which would in particular help Treasuries. As a result, hedge funds earlier this year went long Treasuries and short swaps in the expectation that the spread would flip from being deeply negative to closer to zero.
However the convergence trade only works with lots of leverage (you might have detected a theme here). And the recent volatility has ratcheted up margin requirements across the board, unravelling many of these trades.
That has in turn made the swap spread even more negative, and led to new round of margin calls, even more negative swap spreads, and so on.
OK OK that’s enough. So what does it all mean?
Well, that Treasury market volatility triggered by the Trump administration’s new tariff regime has now sparked a technical unwind of billions of dollars of highly leveraged hedge fund trades — a bit like how Liz Truss’s badly-judged budget plans triggered a meltdown of LDI strategies in the gilt market.
All these trades are in their basic form pretty safe, and arguably a service to financial markets, by helping support Treasury markets and ensuring that all the different parts of the wider rates ecosystem is tied together. It’s the level and fickleness of the leverage that can make them dangerous occasionally.
Normally these things burn themselves out soon enough, but there are rising expectations that the Federal Reserve may have to step in to prevent the Treasury sell-off from becoming disorderly and destructive. In other words, not per se to keep yields low, but to ensure that there are no major financial mishaps.
However, at some point we really should stop and think about whether we want the US Treasury market to be so vulnerable to these kinds of situations that it requires central bank intervention again and again?
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Life comes at you fast. From this morning’s Bank of England Financial Policy Committee report:
US equities and the value of the US dollar had declined in Q1 as some investors reduced US dollar asset positioning. And following the US announcement on trade tariffs on 2 April, the prices of global equities, risky corporate credit, and commodities fell sharply. Market interest rates also fell and yield curves steepened. Market volatility rose significantly and the US dollar depreciated. Market functioning, in the light of exceptionally high volumes, has remained orderly. Notwithstanding these falls in asset prices, the risk of further sharp corrections remains high.
That landed in our inbox at 10:30am. And here’s the yield on UK 30-year gilts at shortly before pixel time:
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30 yrs are obviously particularly important and interesting because the UK issues a lot of them, in part because of their popularity among insurers and pensions funds using Liability-Driven Investment strategies. You can read more about that from Toby here.
They’re also, infamously, the asset class that got most blown up the in the mini-Budget aftermath. So how much trouble are they in?
Well, they’re moving more than their peers in other markets, which is never a good start. Plus. today has seen the biggest move since the aftermath of Liz Truss’s mini-Budget in 2022 (more on that here). Which, tbf remains a pretty steep wall to climb:
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What’s happening? Well, the obvious answer is that US Treasuries are up, so gilts basically have to move too. Again, read your Toby.
There’s also a possibility that the UK will have to cobble together some kind of fiscal response to Donald Trump’s tariff shock, which would involve more borrowing and more price pressure on gilts.
But that doesn’t explain why 30 yrs are specifically getting hit so hard. As TD Securities’ Pooja Kumra writes of this “glaring move”:
On every metric, 30y Gilts are cheap: 30y Gilts vs. UST/Bunds, 30y UK ASWs or 5s30s curve, the move has been striking. Key risk for trade remains illiquidity due to which we keep a wider stop.
She notes:
— Sell-off in long-end seems similar to move seen March 2020. Trigger was global funds liquidating all non-USD holdings as a move to rush to cash. Tracking our fund flows, long-end Gilts have been the key beneficiary of these flows. EPFR flows are still muted in Bunds and so there is less liquidation move.
— Growing presence of leveraged players in Gilt cash and repo market. A key risk flagged by the BoE members.
Once again, all simply roads may lead to Threadneedle Street. Markets are now pricing in far more Bank of England rate cuts, but this type of action might force the Monetary Policy Committee could move more quickly, Kumra suggests:
Markets should not underestimate a possible easing in the form of regulations or verbal easing or even temp QT freeze on this move.
We’ve said it before: it’s Andrew Bailey’s world, we just live in it.
Further reading: — Where the Bank of England’s QE programme went wrong
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Futures indicate that the US stock market could suffer another iffy day when trading resumes, putting it perilously close to bear market territory.
Goldman Sachs’ chief global equity strategist Peter Oppenheimer has therefore updated his bear market anatomy report, and made it public for Alphaville readers here.
After all, as Oppenheimer points out, not all bear markets are created equal, and its nature “has some bearing on the triggers, timing and speed of the recovery”.
Here you can see a full list of every US bear market going back to the early 1800s, how long they lasted, how deep they were and how long it took for stocks to fully recover (higher-res here):
As you can see, Oppenheimer sorts bear markets into three main categories: structural, cyclical and event-driven.
He reckons that we are now on the cusp of a classic event-driven one — triggered by the new American tariff regime — but warns that it “could easily morph into a cyclical bear market given growing recession risk”.
This matters most for how long it might prove to be. The damage tends to be roughly equal, but event-driven ones tend to be brief (and therefore perfect for dip-buying investors) while cyclical bear markets on average last two years, and it take about five years to fully recover the lost ground.
Anyway, there are lots of other interesting titbits in the full report, which you can read here.
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
There has been a lot of tariff-related research and commentary hitting Alphaville’s inbox over the weekend. It can broadly be sorted into the good, the bad, the ugly, and the ARK Invest.
The email from the investment group’s head Cathie Wood starts out in classic everything-is-amazing-ignore-the-dumpster-fire ARK style:
While many observers fear that the Trump tariff policy is a recipe for economic and geopolitical disaster, we believe that what looked at first glance like the largest and most regressive tax increase in US history could turn out to be quite the opposite.
No notes. Almost as good as when Wood bragged about how ARK had incinerated so much money that it wouldn’t have to pay capital gains tax “for years”.
Wood then pivots to Elon Musk boosterism, and blaming Peter Navarro for what even she calls a “chaotic situation based on incomprehensible ‘reciprocity’ calculations”:
Now that President Trump has asked Treasury Secretary Bessent to take the lead from Peter Navarro and Howard Lutnick in negotiating with our allies, what once seemed like a chaotic situation based on incomprehensible “reciprocity” calculations could have been a setup — premeditated or otherwise — for serious negotiations that will lead to lower tariffs and non-tariff barriers, neither of which would have been possible without the shock therapy that President Trump administered. Still influential in the Trump Administration, Elon Musk has been a strong advocate for this solution to the tariff and non-tariff trade barriers that have evolved over the last 50 years.
More great stuff. Let’s ignore that Donald Trump’s pretty much only constant political lodestar has been an aversion to free trade and a love for tariffs. This was actually all a brilliant Art of the Deal ploy to ensure more international trade and lower tariffs.
Wood says her “working assumption” has been that President Trump wants a booming economy and stock market by the second half of 2025, ahead of the 2026 midterm elections. Well, sure, what president wouldn’t want that?
But she admits that the first half may be a bit tough:
Even before the tariff controversy, we had been expecting strong growth to begin sometime in the second half, because we do believe that the last leg of a three-year rolling recession will result in negative Gross Domestic Product (GDP) growth for the first and second quarters. During the past three years, as one cohort of the economy after another capitulated to the interest rate shock that started in 2022, high-end consumers and the government propped GDP up. Now, both are giving way, with the government entering its first recession in 30 years. As a result, the Administration and the Federal Reserve will have more degrees of freedom to stimulate than most investors have been expecting. Now that much of the economy has seized up in response to the fear of tariffs, the drop in activity is likely to be more severe than otherwise would have been the case, a clarion call for tax cuts, deregulation, and lower interest rates.
Look, there is actually an argument to be made that the extraordinary budget deficit that the US has been running has indeed flattered the American economy in recent years.
But blaming a recession on government spending cuts when Doge is mostly FAFOing on the edges and the deficit is actually at a record high is extremely desperate (yes the deficit was down 31 per cent in March, but that is mostly to do with the timing of benefit payments and tax receipts. About $83bn of benefit payments for March were actually paid in February because the month started with a weekend. Without this shift, the deficit would have increased 11 per cent in March.)
The US economy was actually pottering along quite nicely until recently, expanding at a roughly 2 per cent clip until Trump took over. The Atlanta Fed’s latest (gold-adjusted) nowcasting model now implies that we probably saw a 0.3 per cent contraction in the first quarter, and the second quarter is likely to be a mess:
A reminder that a mere year ago ARK forecast an average annual growth rate of 7 per cent until 2030 thanks to robotaxis, the blockchain and AI etc.
Further reading: — Which funds have incinerated the most value over the past decade? (FTAV)
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The US is learning a lesson in market maleficence as post-‘Liberation Day’ shockwaves continue to ripple through global markets. Today’s pain point is US Treasuries, and if they go, nothing’s safe. Not even Games Workshop.
So, is the surge in UST yields and dollar dip the arrival of America’s very own “moron risk premium” — the double discount on bonds and currencies that Britain incurred following Liz Truss’s infamous mini-budget?
No, says the guy who coined the term.
In a note just published, TS Lombard’s Dario Perkins says the US is “a long way from a Liz Truss moment”, pointing to the relatively smaller move in yields since The Event:
Sure, the vibes aren’t great, says Perkins:
For the first time in my career, I’m hearing widespread skepticism about the competency of US policymakers. This isn’t about politics. A lot of investors would welcome, for example, Scott Bessent’s vision for Rubinomics 2.0. And it isnt about “policy mistakes”. The Fed’s history is littered with straightforward errors. It is about recklessness. That is why many global investors are also making the comparison with the UK’s “Liz Truss moment”.
However, it’s the style and pace that really matters. Markets can often cope with things breaking slowly, but it’s a fast break that usually has knock-on effects, as the UK’s LDI crisis in 2022 showed. Here’s Perkins:
The scariest dynamic during the UK crisis was that bonds and sterling were selling off at the same time. That signaled a sudden loss of confidence among global investors. (Confirmed by my conversations with them at the time, and questions like “what the heck is going on in the UK?!”) Yields rose and the currency plunged. That was the dynamic at the heart of my MRP.
Encouragingly this is not the dynamic we are seeing in the US. We did get a brief taste of it, but — so far — there is still global confidence in the dollar. Watch the situation closely, especially given the tone among international investors. Attacks on the Fed, talk of Mar-a-largo accords, threats to foreign UST holders, massive (arbitrary) tariffs . . . these are things that could trigger a nastier mkt dynamic. And that would be the path to a blowout in the term premium and a proper dollar crash.
So, less moronic than Liz Truss at least. Reassuring.
Of course, one advantage the UK had was that, once the going got rough, the Bank of England could simply step in and depose Truss Truss was more or less obliged by pressure from her own MPs to keelhaul both Kwasi Kwarteng and then herself in order to restore (some) market confidence.
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George Saravelos, global head of FX research at Deutsche Bank, has been worried about the outlook for the dollar for a while. Recent events have not exactly calmed him down:
We are witnessing a simultaneous collapse in the price of all US assets including equities, the dollar versus alternative reserve FX and the bond market. We are entering unchartered [sic] territory in the global financial system.
Collapse is a bit strong, but it isn’t great that US stocks, bonds and the dollar are all gyrating lower lately. Notably, after a bounce over the past couple of days, the ICE dollar index is slipping again today:
With that in mind, here are Saravelos’s three main points, which we’ll quote at length given the heightened interest in the topic:
The market is rapidly de-dollarizing. It is remarkable that international dollar funding markets and cross-currency basis remains well behaved. In a typical crisis environment the market would be hoarding dollar liquidity to secure funding for its underlying US asset base. This dollar imbalance is what ultimately results in a triggering of the Fed swap lines. Dynamics here seem to be very different: the market has lost faith in US assets, so that instead of closing the asset-liability mismatch by hoarding dollar liquidity it is actively selling down the US assets themselves. We wrote a few weeks ago that US administration policy is encouraging a trend towards de-dollarization to safeguard international investors from a weaponization of dollar liquidity. We are now seeing this play out in real-time at a faster pace than even we would have anticipated. It remains to be seen how orderly this process can remain. A credit event in the global financial system that threatens the provision of short-term dollar liquidity is the point of greatest vulnerability which would turn dollar dynamics more positive.
The US administration is encouraging the sell-off in US Treasuries. The first order effect of current policy is of course the generation of a large negative supply-side shock that raises inflation and makes it harder for the Fed to cut rates. There is of course the bond basis trade that is being unwound. But there is something larger at play as well: a policy objective of reducing bilateral trade imbalances is functionally equivalent to lowering demand for US assets as well. This is not a theoretical consideration: the US has this week initiated trade negotiations with Japan and South Korea, with a specific reference to currency levels being a negotiating objective. It should not be overlooked that Japan is the largest official holder of US treasuries. An implicit negotiating objective of lowering USD valuations entails the possibility of the sale of US treasuries from the Japanese Ministry of finance. We argued two weeks ago that the whole Mar-A-Lago accord framework was flawed because it imposed fundamental inconsistencies in the desired economic objectives of the administration. We are now seeing those inconsistencies exposed in broad daylight.
Beware a trade war shift to a financial war. At the epicenter of the last few days’ escalation is the trade war with China. As our colleagues have highlighted China appears to be maintaining the optionality on weaponizing the currency while signalling a far more supportive domestic economic stance. With a 100%+ tariff on China, there is little room now left for an escalation on the trade front. The next phase risks being an outright financial war involving Chinese ownership of US assets, both on the official and private sector front. It is important to note there can be no winner to such a war: it will damage both the owner (China) and the producer (US) of those assets. The loser will be the global economy.
What could act as a circuit-breaker? Well, as we wrote this morning there’s already rising speculation that the Federal Reserve will have to act somehow to quell the turbulence in the Treasury market.
We imagine the Fed will be loath to bail out leveraged hedge fund trades (again), but Saravelos reckons that it may have “no other option” than re-starting emergency Treasury purchases if the disruptions continue to deepen:
This would be very similar to the Bank of England intervention following the gilt crisis of 2022. Ultimately, the Fed’s job would be to aid the accelerated de-dollarization dynamic we alluded to earlier in this piece.
While we suspect the Fed could be successful in stabilizing the market in the short-term, we would argue there is only one thing that can stabilize some of the more medium-term financial market shifts that have been unleashed: a reversal in the policies of the Trump administration itself.
Further reading: — America’s endangered ‘exorbitant privilege’ (FTAV)
