Daily Economic Update: April 4, 2025

Switzerland Is The Moon?

Raise your hand if you had the Swiss Franc as a major winner on the tariff announcement.  I guess the best way to avoid tariffs is to hide your money in Switzerland? Meanwhile, crypto—allegedly the solution to everything—did what it always does: trade like a high-beta stock.

Equities got wrecked. The Russell 2000 hit a new 52-week low, the S&P 500 dropped nearly 5% to 5,396, the biggest move since 2020, and it felt like risk just got a nasty wake-up call.

Tariffs, Inflation, and the Treasury Conundrum

The Treasury market is now the scene of a classic debate: 

• If tariffs are inflationary, why would you want to hold long-duration bonds?

• But if tariffs shrink GDP and spike unemployment, maybe you do venture further out on the curve?

Which narrative wins out? How does the Fed react? It’s the kind of thing that could make for some wild positioning swings in the meantime.

After big moves lower the 2Y is 3.70% and the 10Y is 4.04% - for now.

But What If Tariffs Reduce Trade?

We talk a lot about tariffs driving inflation, but what if they just reduce trade altogether? That means fewer dollars heading overseas, which means less foreign investment coming back into U.S. Treasuries.

Is that counterbalanced by countries weakening their currencies to stay competitive—maybe even leading them to buy more Treasuries? These second-order effects take time to unfold, but the bigger question: Does this accelerate de-dollarization?

Are We Reshoring Just in Time for Robots to Take Over?

The U.S. is supposedly bringing back factories. That’s great and all, but is it happening just in time for automation and AI to wipe out those jobs anyway?

Or does America’s edge in tech and AI, combined with “fair trade,” kickstart a genuine manufacturing renaissance?

Not even sure that’s the right question. Maybe the real focus should be on what trade, technology, and labor look like in a world where automation—not foreign labor—is the primary disruptor.  Isn’t it fair that automation has been a major contributor to manufacturing job losses?

The real discussion is much deeper than headlines around tariffs.  Other policies will need to complement views about the future of trade, AI, automation, demographic shifts,  including a re-think of how to train the American workforce with skills relevant for the future.

Geo-Economics: It Doesn’t Matter… Until It Does

You can’t talk about tariffs without talking Geo-economics—a topic Joachim Klement does better than most.  I’ve written about Klement in a few past posts, most recently explaining Geo-economics but previously in discussing the risk of war.  Klement’s latest post ‘Geopolitics doesn’t matter, until it does’ hits on the fact that the impact of geopolitical shocks on the S&P 500 and consumption are nonlinear but also the events that really matter tend to still be rarer than we think. 

Is this one of those times? Markets have a habit of shrugging off geopolitics—until they suddenly don’t.

Jobs Day in ‘Merica

It’s Jobs Day, and consensus is looking for:

• +140K jobs added

• 4.1% unemployment rate

All eyes on the impact of federal layoffs. If yesterday’s data tells us anything…

• ISM Services employment fell to 46.2 from 53.9

• Jobless claims rose to the highest level since Nov 2021

• Challenger reported 275K job cuts (mostly from DOGE-related nonsense)

Not exactly confidence-inspiring.

The Powell Rangers Take the Stage

But don’t worry, the Powell Rangers are here to save the day. At 11:25 AM, Jerome Powell will step up to deliver another round of:

• "Data Dependent"

• "Wait and See"

• "Transitory" (remastered edition)

Markets will hang on every word, but at the end of the day, it’s all about tariffs—for now.

XTODs:

XTOD: Warren Buffett watching the stock market collapse while holding $300 Billion in T-Bills

XTOD (a long one): If your geopolitical analysis still operates through the lens of the pre-pandemic, pre-Ukraine war, pre-DragonBear era, you are missing the plot. 

The world has shifted - dramatically. And if you’re still clinging to outdated paradigms, it’s no wonder you’re struggling to understand what Trump (or this U.S. establishment more broadly) is trying to do.

Let’s be clear: This is not about nostalgia. This is strategic geoeconomic recalibration.

Amid the bifurcation of the global system, the US is trying to bring production, supply chains, and trade networks back into its own orbit.

•Canada and Mexico are locked into the U.S. geoeconomic sphere. •The Monroe Doctrine is quietly returning in Latin America.  •Nearshoring is accelerating.  •Liquidity will be flowing.

•U.S. military presence will be expanding from the Arctic to the Indo-Pacific. 

This is not isolationism - it is systemic preparation for Cold War 2 with the China-Russia axis (the DragonBear).

Partners are being asked to pick a side. Equidistance is no longer an option.

Europe still dreams of strategic ambiguity - but the old trilemma of Russian energy–Chinese markets–American security is gone.  

It will be replaced by a new one:  American energy. American markets. American security umbrella. 

Meanwhile, the ongoing war in Ukraine represents the most dangerous systemic risk since the global financial crisis and the pandemic - and yet many still act as if business as usual is an option. 

Here’s the bottom line for Europe:  You either align with the U.S., You fall into the DragonBear orbit, Or you step up and build a credible geopolitical counterweight - with real military capabilities and power projection, credible alignment, and real skin in the game.

The world is entering a binary era once again - but there may still be space for a third center of power, forged with like-minded countries across the Global South.

The time for fence-sitting is over.

Cold War 2 has begun.

Will Europe face it?

XTOD: Until the post-1971 USD reserve status is changed, the USD will remain wildly overvalued, & not only will American industry always be uncompetitive, but you will be overtaken by China in < 10 yrs.  The choice is big pain now or death of your business in < 10 years.

XTOD: The global economic order changed completely yesterday. We are now living in unprecedented times. Many events that will unfold from hereon will leave us in shock and awe. Buckle up!

XTOD: A (hopefully) calming message:This market is going to scare a lot of people. But remember that volatility and uncertainty is the price of admission to the stock market. Without some short term pain there cannot be long term gains. 

Try to avoid overreacting. Some will be tempted to move all in to cash or make extreme moves. You're not playing poker. You're allocating your savings. If your portfolio feels like a casino you're doing this all wrong. 

What should you do in environments like this?

1) Revisit your financial plan (or create one now - it's not too late). If you absolutely must raise cash then don't go all in. Move about 2 years of expenses to Tbills or cash equivalents. Enough to weather an economic hurricane if it should arrive. 

2) This is a good time to make sure you have an estate plan. Review or establish trust, will and life insurance. Get your financial house in order. 

3) Tax loss harvest. Consider swapping those super high risk concentrated positions into similar, but more diversified allocations. 

4) If you are lucky to have excess cash consider dollar cost averaging into stocks. 

5) Try to think long term. Regular readers know I think in specific time horizons for financial planning purposes. Try to compartmentalize your assets relative to your expected expenses and liabilities. This will help you increase certainty. Stocks are long term assets (15+ years minimum!). Don't treat them like 15 month instruments!

6) Stay the course (if you can). If you have a good plan in place days like today should be irrelevant. If you feel tempted to make big shifts it probably means your risk profile is off. 

7) Talk about it. If you're sitting on stressful losses or volatile positions talk about it. Own the mistake. Get advice and opinions. Don't bottle it up and let it eat you. 

8) Put your head down and do the work. Staring at your account and watching financial TV won't change the market or your portfolio outcome. Get to work doing what you do for a living. Focus, add value, ignore the things you can't control and focus on controlling the things you can. 

9) Go do leg day. I'm serious. Go for a run, walk or bike ride. Live in a squat rack like I do. Get your mind off the craziness. 

Good luck out there. Be disciplined!

https://x.com/i/status/1907810408037015604

https://x.com/vtchakarova/status/1907762216956277189

https://x.com/LukeGromen/status/1907828850085532041

https://x.com/Gautam__Baid/status/1907906086893662676

https://x.com/cullenroche/status/1907771771622949061

 

Daily Economic Update: April 3, 2025

Tariff Bomb Dropped - Now What?

Well, it happened. The long-anticipated tariff announcement is here. The summary? A 10% baseline tariff plus a sprawling list of reciprocal tariffs across 180 countries. You can find the full breakdown on major media outlets—or just check Trump’s Truth Social for the unfiltered version.

Markets weren’t thrilled. After a volatile trading session that somehow ended in the green, the tariff news hit, and as of this writing, S&P futures are down ~3.5%.

What’s the Math?

Social media was quick to notice an interesting pattern: the column listing “Tariffs Charged to the U.S.”—which includes currency manipulation and trade barriers—looks suspiciously like a simple ratio of the U.S. trade deficit with each country divided by their exports to the U.S. I haven’t verified it, but if true, it suggests these tariffs are being applied under a premise that the U.S. should have no trade deficit with any country.

Tariffs: A Congressional Comeback?

This blog won’t settle the global trade debate, but one question no one seems to be asking: Will these tariff experiments eventually push Congress to reclaim its role in setting trade policy? After all, tariffs are just taxes by another name.

Dalio’s Take on Second-Order Effects

Before the tariff announcement, Ray Dalio weighed in on tariffs (generally) - talking about not just the first order effects of tariffs but the second order and beyond.  Dalio also brings the tariff discussion back to the U.S. dollar where shares some musings on ‘exorbitant privilege’ and the strong dollar, thoughts that are worth a read.

Data? What Data?

There’s economic data today—jobless claims and ISM services—but let’s be honest, it’s all background noise. The real focus? How deep this equity selloff goes and whether Treasuries catch a flight-to-quality bid as global growth gets reappraised.

Buckle up.

XTODs:

XTOD: This guy cracked the tariff formula:@orthonormalist It’s simply the nation’s trade deficit with us divided by the nation’s exports to us. Yes. Really.  Vietnam: Exports 136.6, Imports 13.1

Deficit = 123.5  123.5/136.6 = 90%

XTOD: approaching, and surpassing, frightening level of Veep

XTOD: This has to be one of the biggest unforced economic policy errors in US history.

XTOD: Treasury Secretary Bessent tells @annmarie   the equity market selloff is quote 

“A Mag7 problem not a MAGA problem”

XTOD: 13 best  @naval quotes from newest episode with  @ChrisWillx :  ("I don't want to tell anybody how to live their life" edition)

1. “If you get 10,000 error corrections at anything, you will be an expert at it.”

2. “The people who are really extraordinarily successful didn’t sit around watching success porn, they just went and did it.”

3. “I’ll take the happy route that involves material success, thank you.”

4. “The journey isn’t just the reward, it’s the only thing there is.”

5. “Money solves money problems.”

6. “If you want to be successful, you have to be choosy about your desires.”

7. “You can create love anytime, the craving to receive it is the problem.”

8. “I think happiness is just being okay with where you are.”

9. “The easiest and best way to improve your quality of live is to observe your own mind and thoughts and be observant of yourself more objectively.”

10. “Can’t go against your gut, it’ll bite you later.”

11. “If I take myself too seriously, then I’m going to get trapped, I’m going to circumscribe myself again into a limited set of behaviors and outcomes that keep me from being free, spontaneous and happy.”

12. “If you want an automatic built-in meaning to life, have kids.”

13. “All of nature, all of society, all of capitalism, all of human endeavors are underpinned by physical violence.”

https://x.com/Geiger_Capital/status/1907568233239949431

https://x.com/DKThomp/status/1907584344593453506

https://x.com/DavidBeckworth/status/1907556005661090134

https://x.com/FerroTV/status/1907548620984885569

https://x.com/podcastnotes/status/1906869316076888312

Daily Economic Update: April 2, 2025

Liberation Day

Liberation Day is here. At 3pm, the tariff truth drops—assuming we get one. Until then, the market is in a holding pattern.

Markets are not focused on much else and the odds we get full clarity on tariffs today seem slim to none.  In the background the consumer seems to be holding up relatively well. Despite all of the headlines of government related layoffs, there has been little in the way of data indicating that it is having an impact on the overall economic picture - at least not to date. Just look at yesterday’s JOLTS data, the quits rate, hiring rate and layoff rate were unchanged.  However over in manufacturing land the ISM data showed a worsening employment picture, muddied by tariffs.

Sit Down, Be Humble

While we wait, a reminder: this blog exists to cut through the noise, question consensus, and keep you thinking beyond the headlines. If you find it valuable, share it.

[Be Humble] About Tariffs

If you need a refresher on the “t” word, I’ve written my share - still far less than others - go back to my UFC Fight & Thucydides Trap analogy from a month ago for a primer.  Or you can go back two months and ponder who actually bears the tariff tax and how exchange rates might respond. 

What Act Are We In Again?

The point is that we’ve all read a lot about tariffs and I don’t know that we’re really any smarter for it.  Nonetheless, perhaps ‘Liberation Day’ marks the beginning of the beginning of the end, or to quote Winston Churchill, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

If it’s the end of the beginning, what Act of this drama are we in?  This is a transformation, not a conclusion. The real impact of tariffs—beyond today’s noise—will play out over time.

The long-term consequences, further negotiations, and potential shifts in policy will determine the true "end" of this tariff narrative, which is still far from being written.

What Are You Doing For Today’s Holiday?

I don’t know about you, but I’m having pancakes with maple syrup and canadian bacon for breakfast, moving onto burritos and margaritas with tariffed tequila for lunch and finishing out the tariff press conference with a bottle of tariffed champagne.

I might as well live large now before my 401K turns into a 201K.  We head into the Liberation Day announcements with the S&P 500 Index at 5,633 and the ‘growth terrified’ 2Y and 10Y treasuries at 3.88% and 4.16% respectively.  

The yield curve is still inverted between the 3-month and 10-year—something we covered in February. Back then, it shared the headlines with Mary Kate Cornet. She’s back, suing ESPN. And the recession signal? Still flashing.

Anyway, it’s all about the tariffs for now.

XTODs

XTOD: Torpedo bats? Back in my day, players did anabolic steroids, like men.

XTOD: The U.S. stock market typically declines by:  10% every other year

30% every 4-5 years  50%+ once a generation  Invest accordingly.

XTOD: "Smartphone theory of everything" explains many trends: 

• worsening mental health, esp women

• rise of addictive gambling behavior, esp men

• cognitive decline

• lower coupling rates, so lower fertility

• new information bubbles and global rise in populism

XTOD: There will never have been a transformation of a Country like the transformation that is happening, for all to see, in the United States of America. Companies are pouring into our Country at levels never seen before, with Jobs (and Money!) to follow. It is a beautiful thing to watch!

XTOD: A comment on my new essay, "Everything is Fast", that I think is worth sharing https://pbs.twimg.com/media/GnPZTeJXMAA8Kum?format=jpg&name=900x900

https://x.com/troptoberfest/status/1906790496766218675

https://x.com/dollarsanddata/status/1907047922136412582

https://x.com/arpitrage/status/1907075166535852224

https://x.com/realDonaldTrump/status/1906780813204836475

https://x.com/lukeburgis/status/1906106020759269409

Daily Economic Update: April 1, 2025

Powell Rangers & Tariffed Tequilas: March 2025 Market Madness

Alright, let's dive into the financial circus that was March 2025.  March kicked off with markets still reeling from February’s “growth scare.” The S&P 500 wobbled, and investors squinted at economic data like it held the meaning of life—or at least their 401(k) balance.

The “t” word, tariffs! They were still the economic equivalent of that annoying song you can't get out of your head. Remember the pause on Mexico? Me either, but that felt like a brief moment of sanity in a world increasingly fueled by tariffed tequila dreams. But the talk of "reciprocal" tariffs kept the markets on edge, wondering which beloved consumer good would be next in line for a price hike.

Inflation remained the uninvited guest at every economic party, with Atlanta Fed President Bostic pretty much telling everyone the Fed's 2% target was a pipe dream for the foreseeable future. Rate cut hopes for 2025 were fading faster than my spring break suntan. The Fed, those Powell Rangers, were still in data-dependent mode, which, as usual, meant they were just as confused as the rest of us.

Consumer confidence took a nosedive, hitting a 12-year low and flashing recession warning signs, though some of us were probably just feeling the effects of tariffed tequila. The "Expectations Index" was well below that ominous threshold of 80. So, consumers weren't exactly brimming with optimism.

AI continued to be the shiny object distracting everyone. The CoreWeave IPO hiccup raised some eyebrows about the sustainability of the AI boom, even with $NVDA potentially playing the role of knight in shining armor. Was AI the answer to stagflation, or just another overhyped tech bubble waiting to burst? The jury was still out, and probably still trying to figure out what AI actually is.

Speaking of bubbles, the private credit market was getting some scrutiny too. Despite the rapid growth and attractive expected returns compared to equities, the inherent risks weren't being ignored entirely.

Market performance in March saw the S&P 500 attempting to recover from earlier dips, but volatility was the name of the game. The Magnificent 7 were showing some cracks. Bonds were reacting to inflation data and Fed speak, with the 2-year and 10-year Treasury yields doing their usual dance.

Some random happenings that caught the eye:

• The rise of burrito-backed loans – yes, you read that right. Consumers taking out loans to fuel their DoorDash habits via Klarna. Peak 2025 finance? Maybe.

• ARK Invest apparently lost more money than any other fund manager in the past decade. Ouch. 

• The Berkshire Hathaway meeting was apparently going to cost you a cool $5,680 a night for the Hilton across the street. Start saving those burrito loan proceeds!

Investor attention was highlighted as a crucial driver of how markets react to macroeconomic news. So, all those doomscrolling hours might actually be market research? Doubtful.

Overall, March felt like a continuation of the uncertainty that had been brewing. Tariffs, inflation worries, and the ever-present AI hype kept the markets guessing. Consumer confidence was shaky, and the economic outlook was about as clear as mud after a few too many tariffed tequilas. Nobody really knew what was going on, but that, as always, didn't stop anyone from having a strong opinion. And as Mark Twain wisely said, "It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so". 

So, take all of this with a healthy dose of "I don't know" and maybe go watch some baseball. It's probably less confusing than the markets right now - despite the early season controversy over torpedo bats.

Some March Learnings:

• Beware of first-order thinking and understand second-order effects - be careful reaching quick and certain conclusions in a world mired in uncertainty and complexity

• Market narratives drive pricing, but can be fleeting - the line between rational optimism and collective delusion can be blurry

• Question conventional wisdom and “what’s priced in” - what’s thought to be priced in isn’t always understood

• Recognize the importance of long-term perspectives and patience - Zoom out. Your investment horizon is longer than a news cycle. Most of this is just noise—unless, of course, it’s about your tequila budget

Because You Already Forgot January and February

Missed the first two months of the year? Don’t worry, the themes haven't changed: AI savior complex, tariff tantrums, and inflation drama. 

The year kicked off with everyone and their mother trying to figure out if AI was going to save us all or just lead to sentient paperclips. DeepSeek threw a wrench in the GPU-guzzling narrative, making everyone question if $NVDA was the next Pets.com

Trump was back and so were his beloved tariffs. Every other headline was a new tariff threat from champagne to tequila, making happy hour increasingly unhappy. 

The Mag-7 have shown cracks, bonds have been all over the place reacting to inflation data, Fedspeak, tariffs and the overall uncertainty. Gold has hit new record highs - e tu Bitcoin?

The first quarter of 2025: a swirling vortex of AI hype, tariff tantrums, inflation anxieties, and enough market volatility to give you whiplash. Nobody really knew what was going on, but that didn't stop the financial news cycle from spinning wildly. As always, blame Canada.

So what awaits us in April and beyond?

Hold on, let me grab my crystal ball. Obviously eyes are glued to April 2nd ‘Liberation Day’, but the correct answer when asked about the financial future is “I Don’t Know.”  As for advice, what we covered a couple of weeks ago might be the best I can muster.

We start April with the S&P at 5,612, the 2Y treasury yield down at 3.90%  and the 10Y yield at 4.21%. In due time, we’ll see if the April narratives will be different from those of March.

XTODs

Will return tomorrow - not an April Fools.