Uncertainty, a slowdown or more

Good day. In a moment of such uncertainty in the market, each Big Data launch feels much bigger. But today’s CPI numbers can be real. Investors are struggling with what it seems to slow down, and consumer and commercial surveys show that Americans are concerned about higher prices. If the CPI is fashionable today, the market can buy in the worst case: Stafflation. Are attentive to what could be another day of the market chaos. And send me an email: aiden.reiter@ft.com.

The pain continues

If the market had any hope of a “Trump put”, the president may have extinguished it yesterday. Things seemed relatively quiet on Tuesday morning after the defeat of Monday’s market: the markets of future presaged a collection and chaos did not extend to other countries. The market opened in a rise.

The calm did not last. Around noon, Donald Trump said that the United States would double the 25 percent tariffs on steel and aluminum for metals that come from Canada, and the market quickly resumed its slide. A couple of hours later, Ukraine said he would agree for a high fire of the US, inspiring some confidence in the president’s tactics. The actions rose again.

After all ups and downs, there was a final sale towards the end of the negotiation, and the S&P 500 ended the day 0.8 percent.

Yesterday’s Russian mountain only adds to what many analysts told us that it was the key cause of Monday’s sale: tariff uncertainty. Here is Mike Reynolds, Vice President of Investment Strategy in Glenmede:

From our perspective, market movements reflect uncertainty about tariffs, not only the details of what has already been proposed, but also the fact that markets are conditioning a reality where new tariffs may appear at any time. Now it seems that there is a new rate every week.

Tariff uncertainty is not the same as economic weakness: economic data has been fine and, as Ed al-Hussainy pointed out in Columbia Threadneedle, there could still be a growth capture at the end of this year how the policies of fiscal stimuli and tariffs crystallize. Investors no longer like political uncertainty in themselves. For companies, it is difficult to hire, invest and operate. For investors, after years of great yields and high valuations, inspire a career for exit, to protect their profits.

However, for some market participants, the path in which we go to tariffs and Monday’s autumn point for more than uncertainty of the market: they indicate fears of an economic deceleration. From a recent note by Jan Hatzius, chief economist of Goldman Sachs, who degraded his growth forecast from the United States on Monday:

The reason for [our GDP] The degradation is that our commercial policy assumptions have become considerably more adverse and the administration is managing expectations towards the short -term economic weakness induced by the rate. . . While President Trump ended up softening the 25 percent tariff on Canada and Mexico shortly after the implementation, we hope that the next months will bring a critical goods rate, an automatic global tariff and a ‘reciprocal’ tariff.

The S&P 500 has now yielded all its profits since the period prior to the elections and more. Have we seen a correction, or potentially a slight correction correction, due to tariff uncertainty? The unwilling of an overpopulated American exceptionalism? Or the beginning of a true economic slowdown, or perhaps, the stagflation, and with it a longer bear race?

The deceleration theory seems a better bet. Small economically sensitive caps have had important losses. Variable rental markets in Europe and Asia also fell yesterday on a world safety flight, but none fell almost as hard as the United States on Monday. And American investors did not rush to buy the dip at the end of the day on Tuesday.

In addition, on Monday, the differentials between the corporate bonds of investment grade, the high performance bonds and the treasure bonds jumped, after increasing for a few weeks. According to Robert Tipp, Chief of Global Bonds in PGIM, the growing owners are partly a reflection of the concerns about the economy, since the president’s recent comments make it seem to be “unidirectional focused on improving the economy and protecting US companies.”

Yesterday’s capital movements, however, did not fit perfectly in that issue, suggesting that the market is not yet totally convinced that a deceleration is coming. While the whole market fell, the defensives fell more. And the biggest losers on Monday, Infotech and discretionary consumption, fell less. This makes it seem that investors are correcting for the sale of Monday Wild Selling, just a little:

It is possible, then, that this is not the beginning of a bearish market, and it is only a case of investors that adjust the portfolios to an uncertain world. The movements in the treasure market were mostly off; Yesterday we saw a small increase in yields, after a small touch the day before. That suggests that investors left the treasure bonds, instead of running to them for security, Tuesday. But, according to Brij Khurana in Wellington Management, we may not want to read too much in the treasure movements at this time:

The bond market is somewhat out [Wednesday’s] CPI, who would consider one of the most important in years considering the weakness of equity. If we get a high core impression, the market will have to deal with a Fed that will not aggressively relieve in an economic cycle of deceleration. Which is a reminiscence of [bad] 2018 market experience.

We will not have more clarity about whether this is a correction, a slowdown or worse until we obtain more economic data. But we are certainly prepared for interesting weeks. Now that it seems that there is no Trump, we can get even more clashes and tariff surprises. And markets are certainly preparing for it; Vix futures suggest “high volatility for a while,” says Russell Rhoads at Indiana University.

While we expect more data, it is better to lead with logic, instead of emotion. There are still many unanswered questions about tariffs and the strength of the US economy. Panic should not govern the day. But, with staff on the table, I could do it.

Yesterday’s letter correction

In yesterday’s note, we wrote by mistake that 10 -year Treasury prices increased by 10 basic points. He should have said that treasure yields fell into 10 basic points. Our apologies.

A good reading

Critical minerals.