Daily Economic Update: April 9, 2025

If You Had “Volatility” on Your Bingo Card, Congrats Again

Another day, another 4% intraday move. Stocks rallied briefly on headlines of progress in tariff negotiations—whatever that means in April 2025. But just before 1pm, the party ended. The 3Y Treasury auction landed with a dull thud, sporting a 2.4bp tail—the worst since COVID-era dysfunction. And just like that, the S&P did a reverse victory lap, closing below 5,000 at 4,982.  

Treasuries: From Safe Haven to Hot Potato

The story of the day wasn’t just equities—it was the bond market throwing a tantrum. The 3Y auction showed foreigners (indirect bidders) were still present, but the so-called smart domestic money (directs: pensions, hedge funds, mutual funds) said “pass.”

The 10Y yield surged over 30bps in two days, now hovering at 4.30%. Swap spreads? Negative and getting more so—raising eyebrows and swap market newsletters alike. When Treasuries yield more than SOFR swaps, someone’s balance sheet could be screaming. Repo tightening? Liquidity stress? Maybe. Maybe it’s just Tuesday.

As we’ve seen before—COVID, the 2019 repo spike, even the UK’s LDI wobble—sometimes you don’t know what broke until after it’s already broke. We’re not there yet, but we’re in the narrative-building prelude.

Ahead of today’s 10Y Treasury Auction, 10Y yield is 4.30%, the 2Y is 3.73%.

Batteries vs. Bricks

Elon, never one to resist a Twitter (fine, X) flare-up, labeled Peter Navarro “dumber than a sack of bricks” after Navarro referred to Tesla as a mere “car assembler.”

Polymarket odds of Navarro getting fired this month? 11%. Odds of investors regretting buying the recent dip? Higher?

Midnight Tariff Madness

The new tariffs kick in at midnight, and everyone from CNBC to the meme economy is covering the scramble. Apple reportedly chartered entire fleets of cargo planes to move 6 months’ worth of iPhones from Asia into the U.S. before the curtain falls.

What happens next is anyone’s guess. Post-tariff iPhone prices may finally justify that $1,299 screen repair.

If only the memes of Americans working at factories could be taxed to pay for tariffs.

Too Many Moving Parts, Not Enough Patience

We’re seeing a cocktail of chaos: Treasury indigestion, equity volatility, rising yields, tariff fear, and echoes of leverage-induced panic. And while pundits scramble to assign blame, it’s worth remembering what this blog has said before: patience isn’t just a virtue—it might be the edge.

Patience is the forbearance of what one suffers—the willingness to let things mature, to not rush just because the market is.

In Enough, John Bogle opened each chapter with a reminder: “Too Much…, Not Enough.” He’d likely remind investors there are no black swans in the stock market over the long run—only the efficient (if bumpy) compounding of capital by real businesses.

When tempted to run with the herd, Bogle’s advice was simple, and good:

"Don't just do something. Stand there."

XTODs:

XTOD: Breaking: Sources close to the Trump White House say they are pressing on with their tariff plan based on this calculation: That the tumult in on Wall Street in stock market, while significant, will not be matched by a similar tumult in the Main Street economy. That the negative wealth effect primarily targets non MAGA affluent voters; that jobs will be largely retained because of deregulation and tax relief. And soon trade deals will be cut that lessens the tariff impact, so markets will stabilize. Bottom line: They believe that politically they will be just fine and at least for now they’re pressing on. I’m not saying I agree with this; in fact it’s a gamble IMHO and who knows maybe they do a 180. But that’s the thinking as we reach tariff judgment day and markets continue to rattle.

XTOD: The bond selloff is all China. I would bet my left nut.

XTOD: Lots of rumors (best I can tell without strong supporting evidence) of China selling the 10y (and more implausibly, the 30y).   A few observations.

XTOD: "My strong, unwavering belief is that Pax Americana is a damn good deal for the United States AND the world" Somebody's been reading their Kindleberger!

XTOD: American Oil: a $57 handle.

https://x.com/TripleNetInvest/status/1909728248294166684

https://x.com/dailydirtnap/status/1909723908195987799

https://x.com/Brad_Setser/status/1909740555837522318

https://x.com/PMehrling/status/1909703475199369566

https://x.com/tomkeene/status/1909769301357195587

Daily Economic Update: April 8, 2025

Almost The Same Industry

Financial news media continued running its favorite genre: sell-off porn. We even got pieces on circuit breakers - always a vibe when CNBC & Bloomberg starts quoting the SEC & FINRA like it’s gospel. You already know the reason: the “t” word.  

Markets opened in freefall, reversed losses after a headline about a 90-day tariff pause, then got whipsawed again when that headline got promptly body-slammed by reality. When the dust settled: Dow down, S&P lower (5,062), Nasdaq somehow green. Volatile and confusing sum it up.

I Thought The Goal Was Tik-Tok, Not Tit-for-Tat?

China pledges to stimulate their economy while slapping 34% tariffs on the U.S.  The Trump administration fired back with threats of another 50% tariff on Chinese exports. At some point, China might just need to ship over consumer goods and include a check for the U.S. shopper. 

Not the Flight To Quality You Ordered

Speaking of China - are they dumping Treasuries? Someone’s selling. The 10-year yield spike by 20bps to 4.22% , which isn’t exactly the behavior you’d expect in a flight to quality. If it’s not China hitting the bid, maybe it’s leveraged players forced to sell what they can, not what they want, to meet margin calls.

We talked about the Treasury conundrum back on Friday - still relevant. File it under second order thinking and don’t get too comfortable.

Leverage In Focus: Echoes of Explosions Of The Past

Whenever volatility picks up and the word "deleveraging" gets tossed around, someone usually ends up face down in the punch bowl. Remember Archegos? That 2021 moment when one firm, running a giant levered book, detonated after banks—plural—forgot to ask how many IOUs they'd handed out. Just ask Credit Suisse. Or whatever’s left of them. (Hi UBS).

Let’s not forget what Howard Marks wrote back on May 9, 2024 when Marks reminded us about ‘The Impact of Debt’: 

 “But levered portfolios face a downside risk to which there isn’t a corresponding upside: the risk of ruin….“never forget the six-foot-tall person who drowned crossing the stream that was five feet deep on average.” To survive, you have to get through the low points, and the more leverage you carry (everything else being equal), the less likely you are to do so.”

So what’s the impact of leverage today? No one knows. But if this ride keeps going, it seems likely we’ll find out who was swimming naked in that stream.

Tariffs: Symptom, Not Cause?

We talked yesterday about the potential for changing the global monetary order - a Bretton Woods III.  Apparently, Ray Dalio was thinking the same thing. (We assume he’s a loyal reader.)

He argues that tariffs are just a surface-level reaction to deeper structural problems: too much debt, not enough trust, and a financial system propped up on increasingly shaky scaffolding. He might be right. Or he might just be angling for another LinkedIn carousel post.

When Everyone's Guessing, Maybe Sit Still

Here’s the thing: chaos is always loud. Long-term investing is mostly quiet. And patience never trends on X.

We’ve said it before, but it’s worth repeating when the VIX spikes and headlines scream—discipline wins over drama. While the crowd fixates on the next 90-day tariff pause or Treasury yield spike, smart money is thinking in decades, not trading sessions.

XTODs:

XTOD: Chinese memes on American re-industrialization rolling in. lol the music. https://x.com/i/status/1909348105675211192

XTOD: Steve Miran’s Hudson Institute speech represents one of the most concise and clearest articulations of the Trump admin’s worldview, which is often either lost or confusing in Trump’s own rendering. As far as I can tell, they think of the Pax Americana global order as a club membership, for which the US has under-charged for the past few decades. Reasonable people can debate whether the US undercharged but important thing is that the current admin thinks so. So much so that the current admin believes the current system has been made unsustainable and made the US economy at a severe competitive disadvantage and sections of its population in dire economic straits. Again, debatable but that’s the claim.  

So to make the system work, as far as I can tell, basically they want to charge a membership fee to pay for the global order system. And the fee is per usage, the more a member country practically uses club’s facilities and the valuable amenities provided by the US, the more they ought to pay the US through tariffs if not directly in wire payments. Again debatable whether tariffs are really the best means of collecting such a membership fee, since tariffs are at least in part borne by American consumers and create frictions in global trade hence making the whole system less efficient.

That is the philosophical rationale behind the tariff table we saw, which honestly may not have been Miran/CEA’s best possible work as much as something that was just a quick hack. Based on this, I suspect a lot of the severe tariff rates on some of the poorest countries in the world were likely indeed mistakes and will likely need to be revised downwards.

This is a massive change to the global order, but if there’s some silver lining it’s that like it sounds like it’s more a radical reform than a total abandonment of Pax Americana and at least as per this speech not a total decoupling either, which I think is more consistent with Trump’s ideology or lack thereof.  https://whitehouse.gov/briefings-statements/2025/04/cea-chairman-steve-miran-hudson-institute-event-remarks/

XTOD: The Foreign Minister of Iran, Abbas Araghchi has confirmed via a post on X that representatives from the United States and Iran will meet in Oman on Saturday for “indirect high-level talks” claiming that the “ball is in America’s court.”

XTOD: Educate yourself. No one is ever going to teach you enough or hand it to you on a platter. Books and articles, and ask questions—an endless amount of them.

https://x.com/gaborgurbacs/status/1909348105675211192

https://x.com/stevehou0/status/1909344035418079455

https://x.com/sentdefender/status/1909393821865029944

https://x.com/RyanHoliday/status/1909228715130884258

Daily Economic Update: April 7, 2025

The 4 Most Dangerous Words: “This Time Is Different”

A 10% drop in two days — the worst since March 2020. Back then, the world was on fire and buying the dip worked (for now). Will it work again? Who knows. But as the old saying goes, “the four most dangerous words in investing are: ‘this time is different.’” 

The S&P 500 now stands at 5,074.  The 10Y treasury yield has retreated to 4.00%, which is still some 40bps above the September 2024 lows of 3.60%.  The 2Y yield has moved down to 3.66%, which is near their September 2024 lows of 3.50%.  Remember back then? All the talk was about China’s economy, strikes in the U.S. and the war in the Middle East.  Today’s tariff tantrum may prove stickier — and bonds aren't sure whether to price inflation or slowdown

The Ratliff Family Jinx

Speaking of losses - Duke.  Hard not to wonder if their tournament run was cursed by White Lotus. A suicidal Timothy Ratliff in Duke gear? That’ll do it.

Recession Odds Climb

As for the fate of the economy, JPM puts recession odds at 60%.  The jobs data on Friday didn’t scream trouble - NFP came in at +228K and the unemployment rate to a rounded 4.2%.

And the Powell Rangers?

As of Friday it didn’t seem Powell was ready to come to the rescue - the FOMC “does not need to be in a hurry” to adjust policy according to him. 

Will this be a repeat of Powell in October 2018 when he quipped that “we’re a long way from neutral” at the time indicating more hikes were on the come despite Trump 1.0’s trade war with China.  Fast forward to December 2018 and the S&P was down 20% feeling the impact of tighter financial conditions and concerns over a global growth slowdown.  It took a little bit of time but by mid-2019 Powell had initiated “mid-cycle adjustment” rate cuts.

Will this time be different?

Paging Belgium?

Robert Triffin, a Belgian economist, theorized the “Triffin dilemma”; in a Bretton Woods system, with fixed exchange rates and the ability of central banks to convert dollars to gold on demand, the world wasn’t going to be able to satisfy the demand for reserve assets with gold, so dollars would act as a substitute. As Paul Volcker discusses the Triffin dilemma in his memoir: 

• “But to maintain growth in those dollar reserves, the United States would be required to print more and keep running balance of payments deficits, inexorably producing inflation and undermining the dollar’s ability to be converted to gold on demand at a fixed $35 price.”

• Triffin’s point as echoed by others was that this ‘exorbitant privilege’ ascribed to the U.S. dollar might lead to a dollar that was chronically overvalued and that it would be virtually impossible to maintain a system based on convertibility between gold and a single reserve currency in a world of expanding trade and growth. 

• “Eventually the sense of trust upon which the currency rests will be eroded if its use is overextended.”

Of course this convertibility of dollars to gold collapsed back in 1971 with the “Nixon Shock” and we moved to a new “dollar standard” or a system some call “Bretton Woods II”.

The Triffin dilemma is still relevant - just transformed. The U.S. still supplies the world with liquidity - now through U.S. treasuries which creates its own set of imbalances, especially the U.S. running a persistent trade deficit. A system some say leads to lower interest rates and an overvalued dollar that encourages an unsustainable build up of debt.  Or as some describe a system where export driven economies lend money to the U.S. consumers to keep the system afloat artificially.

Not everyone sees the current system as a problem or even a dilemma.

Tariffs and the Dollar Order

The exact views of the Trump Administration around the Triffin dilemma aren’t entirely clear, but it is clear their policies are aimed at addressing perceived trade imbalances and perceived negative impact of such imbalances.

Whether the future is playing out in a way that former Credit Suisse economist Zoltan Poszar termed “Bretton Woods III” - a multi-polar world with commodities anchoring reserves and a decline in the dollars ‘exorbitant privilege’ may still be premature, but for the time being last week’s tariffs announcements have raised questions around the future of the global monetary order.

The Week Ahead: Data for Show, Tariffs for Dough

Monday: Nothing but NCAA Madness

Tuesday: 3Y Note Auction

Wednesday: Inventories, 10Y Note Auction, FOMC Minutes

Thursday: CPI, jobless claims and Fedspeak

Friday: PPI, UofM

XTODs:

XTOD: Breaking: Big Wall Street trading desks will be manned in time for tonight’s futures open. They are preparing for more selling, intense selling. But you also hear talk about “value” and how some really good stocks are “over sold.” But bearishness is clearly the overwhelming sentiment. This is not totally uncharted territory for markets (not analogous to the economy). In fact it reminds me of 2008 and the whipsawing sales amid the bank failures etc. The question is: Will the Fed intervene and go to war with Trump if this persists. Developing

XTOD: Stanley Druckenmiller thinks tariffs are the lesser of two evils.  We have to do something given the current situation the United States finds itself in.

XTOD: How does the media strike fear in investors?   Here’s an example from my feed this morning implying that tariffs could lead to a long and deep depression and the rise of another Adolf Hitler:  “The Smoot-Hawley tariffs of 1930 helped lengthen and deepen the Great Depression and led to the collapse of global trade, which hit German exports. That in turn contributed to the downturn that helped Adolf Hitler recover from a false start in German politics, as William Shirer documents in The Rise and Fall of the Third Reich.”

XTOD: You can, simultaneously: 

- Dollar cost average, remain long-term optimistic. 

- Not panic. 

- Enjoy the outdoors, kids, good food, etc. 

- Realize how unbelievably destructive and unnecessary this is.

https://x.com/CGasparino/status/1908929935294480588

https://x.com/APompliano/status/1908885557419135409

https://x.com/Rick_Ferri/status/1908854259824906479

https://x.com/morganhousel/status/1908173256940822573

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