Macro Trends

March/April 2025 Macro

The world is different. President Trump is indeed a transformational president, and his reversal of many traditional elements of US domestic and foreign policy are triggering dramatic action in other parts of the world.

The European Commission is moving to allow members to have greater fiscal leeway. The UK's Labour government has opted to boost defense spending by cannibalizing its foreign aid budget. The Polish government is seeking nuclear weapons, either its own or foreign deployment.

The UN vote, which for the first time the US sided with Russia, Iran, and China over Europe on a security issue, signals the greatest crisis in the Atlantic alliance since at least the Suez Crisis (1956). The territorial overture to Greenland, part of NATO-member Denmark, sparked some talk of the deployment of European forces, whose purpose would not be to deter China or Russia.

Trump's key claim is that America's traditional allies have taken advantage of it more than its traditional rivals. His wrath appears more aimed at them that Russia or China. He asserts that the EU was created to "screw" the US, though the historical record tell as different story.

Many Americans do seem to believe that the chronically large trade deficits reflect unfair foreign trade practices that are making the US poorer. Yet, it is difficult to square this with the economic data. The US economy has consistently outperformed the rest of the world for decades.

Moreover, for historical reasons, US companies pursued a strategy foreign direct investment strategy rather than a traditional export-oriented approach to serve foreign demand. Since the US data began more than 60 years ago, sales by affiliates of US multinationals outstripped US exports by magnitudes.

Contrary to conventional wisdom, the critical driver is not just cheap labor. A better explanation is that US foreign direct investment is more likely to be in or near important customers and markets, which are often in higher income economies.

In his first term, Trump renegotiated the North American Free-Trade Agreement (NAFTA) and replaced it with the USMCA. Now, in an apparent reversal, the Trump administration argues near-shoring and friend-shoring are not good enough. Only onshoring will suffice.

On April 2, 2025, the US is expected to announce details of its reciprocal and possibly more sectoral tariff strategy.

Tariffs are simply inflationary

March 2025 Canada, Dollar, US Equities

While President Trump has been candid in his assessment that US allies have taken advantage of the US more than America's traditional adversaries, he seems to hold a special dislike for Canada. Nearly all the threatened tariffs apply to Canada, plus reports suggest he is considering forcing Canada out for of the shared intelligence group "Five-Eyes". Trump's territorial ambitions include Canada, but it is unrealistic on numerous grounds (to say the least).

The dollar is fraying the lower end of last week's range near CNH7.2280.

There has been a sea-change with respect to the dollar. The combination of growth fears in the US and the reduced tail risks in Europe has seen the Dollar Index decline by 6% since peaking a week before President Trump's second inauguration. It has exceeded the (61.8%) retracement of the "Trump rally" that arguably began at the end of last September.

The sharp sell-off in US equities has spurred at least 10 corporations to delay their investment grade bond sales.

More Social Political Economic Unease for Germany in the Next 5 Years due to Mounting Deficit

Wellness Economy Expanding

Wealthy Boomers Control U.S. Politics

US Home Improvement and Maintenance Spending is set to Grow by 1.2% in 2025 After Two Years of Decline

Source: Joint Center for Housing Studies of Harvard University

3/1/2025

US Homelessness at Record High

Source: Joint Center for Housing Studies of Harvard University

3/1/2025

US Federal Agency Employment Update

USAID is shrining from 10,000 to 300,
A hard hit for those who give their all. ✂️📉
Bigger agencies brace for the hit,
The storm has come—yet just the start. 🌪️🏛️

Note: As of Jan 2025, 3 million civilian were working for the US government, including 600,000 postal service employees.

2/27/2025

Trump plans to close CFPB (Consumer Financial Protection Bureau) and terminate its 1,700 employees. Despite these changes, the administration asserts that the CFPB will continue to operate in a more efficient form. - Part of deregulation effort

Future federal staff reduction as planned: Social Security Administration (SSA): Plans are underway to reduce up to 50% of its 60,000 employees, potentially affecting around 30,000 positions. Environmental Protection Agency (EPA): Approximately 388 employees have been dismissed, including researchers and personnel responsible for upholding environmental protections. Department of the Interior: A total of 2,300 employees have been terminated, with significant cuts in the National Park Service and the U.S. Fish and Wildlife Service.

2/28/2025

Who Really Pays for Higher U.S. Tariffs?

• Tariffs are paid by U.S. importers, not foreign sellers.

• Costs are passed to American consumers through higher prices.

• Foreign exporters may feel indirect pressure from lower demand.

• Some foreign sellers may cut prices, but U.S. buyers still bear most costs.

• Majority imports from EU are medicine, chemicals and vehicles. They probably regret to have quited Chinese market and reply on US market since 2023.

3/5/2025

U.S. Recession is Coming? Stagflation Concerns?

With personal consumption at 68.18% of real GDP, the economy looks just fine. 🚀📊

Yet, Atlanta Fed projecte negative GDP in Q1 '25.

3/5/2025

Job Worries Rise as Americans Cut Back on Travel

Job opportunities are shrinking, making Americans cautious about spending. Fewer people are planning vacations, so hotel and airline stocks may struggle.

Consumer confidence is down, but CEOs remain optimistic. Meanwhile, big tech stocks are in correction territory after a long rally.

On the bright side, U.S. small caps might offer potential opportunities for investors willing to take risks.

2/26/2025

Tech Sector Selloff in early 2025

3/20/2025

U.S. Mortgage Forecast

Thinking of moving or buying anew? 🏡
Rates drop below 6% in 2H of 2025—stay tuned!

2/24/2025

U.S. Home Value Forecast

Home prices have doubled in a decade’s climb, 📈🏡
But future gains will slow to 3% over time. 📉
Owning a home remains the American dream,✨
Yet Mortgage above 5%, rent or buy isn’t so clear. 🤔💰

2/24/2025

China Massive Stimulus and Reduce Exports Directly to U.S.

Brazil Returns to High Inflation High Interest Rates Market