Steno Signals #187 - Remember August & September 2024? Tariffs are to blame

The price action and macro trends are starting to resemble those of early autumn 2024, which ultimately led to a material rate-cutting cycle. Could the Fed be stepping in sooner rather than later..

Friday’s bizarre scenes in the Oval Office will take some time to digest for all involved counterparties. I don’t feel in a position to judge either side, but I will use this analysis to assess the ramifications of the event. As a disclaimer, remember that I am European!

Trump’s argument that the U.S. pays too much to the rest of the world is, in many ways, entirely correct—but also quite banal.

This has been a deliberate strategy by the U.S., as it has allowed them to shape the world culturally and politically.

Now, the U.S. has been transformed into a marketplace, and I don’t think people truly understood that until this weekend.

The challenge is that the U.S. has a debt problem, and the American people no longer want to finance other countries’ problems—the liberal ambitions are dead.

But I don’t think what Trump is doing is unpopular. He is more firmly in control than ever before.

Fundamentally, this also means that the idea of the U.S. as the guardian of the liberal world order is dead for now—something I have been warning about for six months. However, India, China, Russia, and others seem to like what they see.

The final question is: at what point during this shitshow will Europe, China, and others decide to offload U.S. assets in size? I find the USD vulnerable, but I could be wrong. The macro picture supports this admittedly slightly ungrounded analysis. We are seeing a clear downtrend in our USD macro model as the tariff headaches start to take hold.

We have likely seen a material front-loading of activity ahead of tariffs, while the March/April data shows a lack of new orders and an inventory build-up.

See more below!

Chart of the week: US growth trends are sliding