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US dollar ‘at risk of confidence crisis’ as Trump tariffs rattle global markets – business live
Ursula von der Leyen says tariffs a ‘major blow’ to world economy, as US dollar falls to six month low after US President Trump’s ‘liberation day’
U.S.-based employers announced 275,240 job cuts in March, driven by Elon Musk’s slashing of the Federal government.
Consultancy firm Challenger, Gray & Christmas have reported that job cut announcements rose 60% month-on-month, and were 205% higher than in March 2024.
That’s a record high for any March, and the third-highest monthly total ever recorded.
Of that total, 216,670 were due to “DOGE Actions” – Musk’s campaign to improve government efficiency by making drastic cuts to government bureaucracy.
https://www.theguardian.com/comment...-the-grim-return-of-slash-and-burn-government
ChileG
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He dropped out after month two.
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Today is rough, but not enough to price in a recession - yet:
GIFT LINK
—> https://www.wsj.com/finance/investi...f3?st=Safpk6&reflink=mobilewebshare_permalink
“… Yet, while the market is moving fast to price in a higher chance of recession, it is far from fully prepared.
The S&P 500 is only down 10% from its all-time high and back to where it stood in September. Usually in recessions, stocks eventually fall at least 20% and give up far more than six months of gains. The S&P is still valued at close to 20 times forecast earnings, too, which would surely be unsustainable in a recession.
The same goes for junk bonds. Higher-quality junk, where most bonds are issued, has barely been hit so far, and even those rated CCC and lower which are closest to default are only back to their September levels. Spreads will probably widen further, but in actual recessions, when defaults are expected to spike, spreads could easily soar to double the current level, bringing huge losses.
… We can get more granular. Before Wednesday evening’s tariff announcement, stock options implied about a 10% chance of recession over the next year based on a measure used by Pimco, which looks at the implied probability of valuations dropping below 15 times earnings. Interest-rate derivatives implied about a 15% chance of recession, measured as the chance of rates being below 1.75% in two years’ time. Neither is a surefire measure; after the dot-com bubble, valuations took years to return to more normal levels, despite the recession. Tariff-induced inflation could also limit the Fed’s room to slash rates in a downturn.
Treasury yields haven’t actually fallen all that much. The 10-year is off 0.7 percentage points from its high earlier this year. But it has had bigger falls over such a period three times in the past two years. Two of those times, they ended up dropping more than a percentage point. …
Since recessions commonly cut rates by three points or more, a much bigger fall in yields would be needed if recession became a certainty. Unless, of course, stagflation prevents the Fed cutting—but that would mean the economy, stocks and corporate bonds would suffer even more.
For now, markets think the Fed will look through the tariffs and cut even as the new taxes push up prices.
… Markets think this is likely: The chance of a rate cut next month priced into futures doubled to 20% after the new tariffs, according to CME FedWatch, and three or more cuts are expected by the end of the year.
Investors who think the return to tariffs higher than the 1930 Smoot-Hawley rates will hammer the economy into recession should expect much bigger falls in stocks and bond yields as the year goes on.
Those who think the rest of the world won’t retaliateand that Trump will quickly negotiate the rates away can be happier with the still-high levels of prices. But they still ought to worry about the damaging effects of prolonged uncertainty on the economy.“
GIFT LINK
—> https://www.wsj.com/finance/investi...f3?st=Safpk6&reflink=mobilewebshare_permalink“… Yet, while the market is moving fast to price in a higher chance of recession, it is far from fully prepared.
The S&P 500 is only down 10% from its all-time high and back to where it stood in September. Usually in recessions, stocks eventually fall at least 20% and give up far more than six months of gains. The S&P is still valued at close to 20 times forecast earnings, too, which would surely be unsustainable in a recession.
The same goes for junk bonds. Higher-quality junk, where most bonds are issued, has barely been hit so far, and even those rated CCC and lower which are closest to default are only back to their September levels. Spreads will probably widen further, but in actual recessions, when defaults are expected to spike, spreads could easily soar to double the current level, bringing huge losses.
… We can get more granular. Before Wednesday evening’s tariff announcement, stock options implied about a 10% chance of recession over the next year based on a measure used by Pimco, which looks at the implied probability of valuations dropping below 15 times earnings. Interest-rate derivatives implied about a 15% chance of recession, measured as the chance of rates being below 1.75% in two years’ time. Neither is a surefire measure; after the dot-com bubble, valuations took years to return to more normal levels, despite the recession. Tariff-induced inflation could also limit the Fed’s room to slash rates in a downturn.
Treasury yields haven’t actually fallen all that much. The 10-year is off 0.7 percentage points from its high earlier this year. But it has had bigger falls over such a period three times in the past two years. Two of those times, they ended up dropping more than a percentage point. …
Since recessions commonly cut rates by three points or more, a much bigger fall in yields would be needed if recession became a certainty. Unless, of course, stagflation prevents the Fed cutting—but that would mean the economy, stocks and corporate bonds would suffer even more.
For now, markets think the Fed will look through the tariffs and cut even as the new taxes push up prices.
… Markets think this is likely: The chance of a rate cut next month priced into futures doubled to 20% after the new tariffs, according to CME FedWatch, and three or more cuts are expected by the end of the year.
Investors who think the return to tariffs higher than the 1930 Smoot-Hawley rates will hammer the economy into recession should expect much bigger falls in stocks and bond yields as the year goes on.
Those who think the rest of the world won’t retaliateand that Trump will quickly negotiate the rates away can be happier with the still-high levels of prices. But they still ought to worry about the damaging effects of prolonged uncertainty on the economy.“
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Reminder — Trump-run companies have filed bankruptcies six times:
Also
“… Trump Shuttle Airlines failed after two years, with a plane crashin the first two months. Trump Mortgage lasted a year and closed in 2007 due to the fact that Trump’s hired executive, E.J. Ridings, significantly inflated his resume.
Trump Steaks failed, Trump Magazine failed, GoTrump.com failed, Trump The Game failed, Trump Vodka failed.
Trump University failed with a $40 million lawsuit from the New York Attorney General. …”
Donald Trump’s failed business ventures indicate lack of economic knowledge - The Ticker
In the 2024 election, nine in 10 registered voters said that the economy was one of the top issues—and as the election results show, voters trust Donald Trump to handle things. But why? Throughout his career, Trump has poured money into countless failed ventures, which should raise questions...
theticker.org
superrific
Legend of ZZL
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Oh, he's been talking about it for 35 years? What an expert.
superrific
Legend of ZZL
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I do not envy central bankers around the world right now. The Fed hasn't had a more difficult policy-setting environment since the 1970s at the earliest.
I would not cut interest rates. I would try to keep inflation under control. Cutting rates in the face of contractionary fiscal policy is likely to be ineffective. Keep inflation low, and wait for the political branches to remove the tariffs and the ridiculous slash-and-burn tactics at the government.
I would not cut interest rates. I would try to keep inflation under control. Cutting rates in the face of contractionary fiscal policy is likely to be ineffective. Keep inflation low, and wait for the political branches to remove the tariffs and the ridiculous slash-and-burn tactics at the government.
lawtig02
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| Donald J. Trump to the Economic Club of New York, September 5, 2024: “We will bring our auto-making industry to the record levels of 37 years ago, and we’ll be able to do it very quickly through tariffs and other smart use of certain things that we have that other countries don't.” “Energy is going to bring us back. That means we’re going down and getting gasoline below $2 a gallon, bring down the price of everything from electricity rates to groceries, airfares, and housing costs.” “We will eliminate regulations that drive up housing costs with the goal of cutting the cost of a new home in half. We think we can do that.” Donald J. Trump now: “WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!) BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.” Let them eat flatscreens, I guess. |
UNCBAdookJD
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Oh it went Boom alright.
HesNaughtHere
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Hiring Defied Expectations in March, With 228,000 New Jobs
GIFT LINK —> https://www.wsj.com/economy/jobs-re...01?st=PCWNh8&reflink=mobilewebshare_permalink
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“The U.S. added 228,000 jobs in March, the Labor Department reported Friday, well above the gain of 140,000 jobs economists polled by The Wall Street Journal had expected to see.Hiring Defied Expectations in March, With 228,000 New Jobs
GIFT LINK
That was more than the 117,000 jobs added in February.
The unemployment rate, which is based on a separate survey from the jobs figures, ticked up to 4.2%. Markets have been jolted this year by the unfolding impact of the Trump administration’s trade policy and government layoffs. …”
heelinhell
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Meantime, the Dow futures are down another 1000 points and the S&P is down another 130 points this morning