Tariffs Refueling Inflation, Global Trade Barries and More! Macro Monday ft. Andreas Steno & Mikkel Rosenvold

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1:50Hello out there. Welcome to another edition of Macro Mondays. My name is Michael Roosevelt. I'm your host as usual and with me as usual, You, Andreas, welcome to the show. Thank you very much, Miguel. Andreas, it's been an interesting week. We have a lot of ground to cover here. Still a lot of stuff going on. Still a lot of volatility in equity markets. We'll look more into the inflation picture. I think a lot of indicators pointing in different directions, a lot of uncertainty as to where inflation is going, which could prove crucial for markets over the next decades. We'll talk a little bit about Yemen.

2:25We'll talk some trade ideas as well eventually in this show. Remember that this is a sneak peek into all the research and analysis that we do at Standard Research. We publish a lot of it on Real Vision with the Pro Macro tier. You can gain access to loads more of that, as well as even more shows from our side. We're sending this live on various platforms, Real Vision, YouTube, Twitter, what have you. So please post your questions and we'll bring them up during the show as many as we can find time for, essentially. Miguel, you promised that it will carry repercussions for the markets over the next decades, whether inflation is going on.

3:04I guess 30 minutes is a little bit on the low side if we want to cover that much ground. But let's have a look at it. Sorry about that. I'm in quarters. but yeah absolutely no we are usually that's actually a good way to a good um segue into to just mentioning that we are very very short term often in our analysis here and the trading strategy is relatively short term at least so that's what you should expect here um also remember that while we try to be very actionable and uh obviously we have a huge analysis apparatus behind these ideas and positions that we suggest remember that our trade ideas might be sometimes it may be good, sometimes it may be shit yeah, exactly, very good to get that out of the way Andreas, I want to start by perhaps pointing the spotlight on a blind spot for some Americans because we often get the questions about how do Europeans view Americans and this whole US equity sell-off that we're in the middle of, I think at least to some extent it's related to a general fear or worry about what's going on politically in the US.

4:16And to be very, very specific, I brought, and now, sorry to all your listeners, this is a Danish article. They didn't produce an English version of it. So it's just to give you a glimpse into what's actually going on here or in our parts of the world. So what you're seeing here is a Danish pension fund, Academia de Pension, medium-sized pension fund in Denmark, excluding Tesla. So they're basically acknowledging it's no secret that Tesla has been a market leader also in the green tech. But we're seeing more and more problems arise and they are excluding Tesla from their portfolio and investing in Tesla as a first step.

4:57Yes, and they actually had a position of roughly half a billion day-ish, I think. So it's a sizable investment that they've divested now. I guess this, Mikkel, this is very telling for the sentiment around Trump bets and Trump proxy bets here in Europe. And I'm not trying to pick a side here outside of very clearly highlighting with this story that it is something that is an ongoing thematic at sea level in the big investment firms in Europe. Absolutely. should we divest from the u.s because of what's ongoing um i think it's a very very sad development in many ways i mean um come on guys we used to be friends right uh and you know i personally i don't have any issues at all investing in the u.s but uh this is something that we hear more and more um and i guess with this very important trade tariff deadline upcoming early april also between the eu and the u.s on these reciprocal tariffs we should probably expect more of the same like politically based decisions not to invest in Tesla, Palantir, everything that could be connected to Trump in some sort of way.

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8:17Widening requests or discussions of boycotting U.S. goods. That's very, very tough to do even here in a country like Denmark. I mean, you're going to stop drinking Coca-Cola. You can drink local cola. You're not going to do that. stop going to McDonald's. But Tesla's being hit by this in a big way because you do have alternatives. You can discuss whether they're actually less US dependent or whatever, but it's a real thing. And it's happening over here. But it's also very telling for, you know, the practical decisions around how to, quote unquote, boycott the US from an investment perspective, because, you know, they're obviously not ready to divest from the US fully.

8:56No, no. By no means. but Elon Musk he's got this whole trade war anti-NATO stance tattooed all over his face right now because of his actions on SOMI so it's a very simple and symbolic decision to divest from Tesla and I think we'll see more pension funds, potentially the oil fund in Norway doing the same, they have a huge position in Tesla as well and it's something that they you know they're getting questions on a running basis from politicians on whether to divest that position basically and in many cases uh europe is a huge market perhaps not too critical for many years companies for tesla it is huge we're actually driving evs never many places in the world you are there so uh yeah just a little glimpse into what's going on here on our end of the pond we get to usually get a lot of questions from that uh should we take a look and talk a little bit about middle least, Andreas.

9:51Yeah. Speaking of turmoil. Yeah. Speaking of turmoil, now we're going from Tesla to an aircraft carrier here. I just wanted to bring this every chance you get to post a picture of an aircraft carrier, you should do it. The USS Harry Truman, which was allegedly attacked by the Houthi militia in Yemen. Remember those guys, Andreas? We talked a lot about them 12 months ago. They shot off traffic through the Red Sea Channel. after the ceasefire in Gaza between Israel and Hamas, they were supposed to open up. They did to some extent also for European shipping. We haven't really seen the major shipping companies re-enter, but that's, as far as we understand it, we talked to a lot of these companies, an insurance issue.

10:33So all the insurance companies have been reluctant to allow them to go through on regular insurance terms. Now it seems like they're beginning to hit U.S. shipping again. U.S. has responded in a big way. And I think this week we're going to see heavily increased U.S. attacks from these aircraft carriers. So I actually thought we had more or less put a lid on the Middle East situation, but this obviously reignites things also with regards to Iran. Hi, Raoul here. Listen, I think we've got until 2030 before the economic singularity arrives. Now, it might not be the exact date, but it's around then.

11:10So we have about six years to figure out how to unfuck our future. I've put together a report to help you called Prepare for 2030. It's going to help you take the first steps in that journey to make sure you're secure past 2030. So just click on the link below and start your journey now. So how much do you think this is going to affect markets over the coming months? You know, it's quite clear that we don't really have a geopolitical risk premium in oil prices anymore. You know, everyone kind of reached the same conclusion as we did, say, over the past eight weeks. A fading geopolitical risk premium, truce in Gaza, all of that.

11:51But this Houthi militia, I kind of get the vibe that they intend on being part of the geopolitical picture going forward, despite what's ongoing in Palestine and all of that. Initially, these attacks were quite clearly linked to the war in Gaza. Now we have a truce there. Now they're using another excuse that aid ships are not being allowed to offload in Gaza and stuff like that. So they're finding, quote unquote, new excuses to get involved. And this Houthi militia, no one knew a word about these guys until, was it a year ago or so? And they've gained a lot of territory, at least symbolically speaking, from getting involved in this.

12:38Absolutely. And gained a lot of hearts and minds, not least. So I think they will continue at least until they're erased from the matter. It's a matter of their intention. And there's a limit to how much harm you can do from an aircraft carrier and these guys, because they've already been bombed a lot. You can keep bombing them, but eventually they're going to all be living in bunkers. And what are you going to do then? The only solution is to send in ground troops. And I don't think Trump wants that. I think they've been trying to, and Biden administration especially, have been trying to convince Saudi Arabia, living right next door, being supplied with U.S.

13:15weapons for decades, asked them to go in and clean up the shop, and they're refusing outright. They don't want any part of that. It's a hill-hole for them to get stuck in. So a very, very tricky situation because, as you say, the Houthis have huge advantages from continuing this campaign on international shipping, and this obviously delays the return of international shipping to the Red Sea and delay that relief in especially European inflation that could stem from that. Speaking of inflation address. Yeah, I would love to show a chart on global tariffs. Yeah, okay, okay. I'll let you have it.

13:54Because this chart went viral when I tweeted it. And kudos to Bank of America, their investment research arm. They created this global overview based on the most up-to-date data we have from 2023 on tariffs and trade barriers across the globe. And this is obviously before Trump started imposing new tariffs on counterparts. But it's just to give you the backdrop. Because it's, in my opinion, this story is not told enough. And it's especially not really brought forward in the media, in the countries that are hit by these new tariffs. of the United States. The reason why Trump finds the playing field to be unequal is that there is no level playing field on trade.

14:50And it's not been the case for a long while, even with the World Trade Organization and such, obviously gaining importance over the past couple of decades. We're still talking about most countries worldwide, if not all countries worldwide, imposing more sanctions on the U.S. than vice versa. Or barriers. Yeah, or barriers. Yeah, trade sanctions or whatever you call it, right? But the point here is, you know, the reciprocal tariffs that are upcoming in the first week of April, they're aimed at creating a level playing field. You know, they're trying to sort of equal out these differences. So if you're at the very top of this leaderboard, you should obviously fear what's upcoming.

15:39And, you know, my hope is, and it was my initial analysis, was essentially that all of those countries above the U.S. on this leaderboard with more trade barriers, with higher tariffs, that they would be forced to bring their barriers lower in response to these reciprocal tariffs. We sadly haven't seen much of that yet. So maybe India is the first country moving in this direction. We've also seen some signs of a deal there. But the UK, Germany, China, etc., that we can mention from this list, they've moved in the opposite direction. They've retaliated. They've told the U.S. that they consider this an aggression under the World Trade Organization umbrella and all that, which is basically nonsense in many ways, at least in my opinion.

16:30so i understand why there is a growing unease with the way the u.s is treated from a trade perspective the backdrop to all of this and that's more down your alley mingle is that you know obviously the u.s got a lot of you know soft power in return for this yeah but it seems like donald trump couldn't care less about that soft power basically no no i mean this the sort of an institutional trade deficit, if you could call it that, or at least deficit in barriers, has of course been a tool for the U.S. to apply dominance or influence, exerted influence across the globe, essentially. It was a point in itself for the countries to be trading with the U.S., even if the U.S.

17:16had to pay a premium, because that linked those countries closer to the U.S. and aided the U.S. in global affairs, basically. Yeah, and great power competition, essentially. That way of thinking is out of the door now. That's very clearly not Trump's aims right now. I'm very curious to see whether we will see this race to the bottom. I completely agree with your logical assessment. I think perhaps a lot of countries are still viewing this as sort of a black box. What's going to come with this terror space? The tariffs that we have seen implemented have been more down the fentanyl path, I would say.

17:54So the directed tariffs at China, Mexico, Canada, all related to the fentanyl crisis, more than it's been down this reciprocal path, if you understand what I mean. That could be some logic that still we need to see the Trump administration say, okay, that was one thing, the fentanyl, now we're all in for reciprocal tariffs. Then it would make a lot of sense for everyone to lower the tariffs and lower the trade barriers. That's the positive spin on this. Yeah, but maybe, you know, if we look at the line of events from here, I guess we'll see some sort of package announced in April from the Trump administration on the reciprocal tariffs.

18:35Then we'll like to see a lot of countries retaliating to that, testing whether the U.S. administration actually means business here. as some of the executives that I've talked to around how to navigate this terrorist wall, they've basically all told me, let's see whether this is just a transitory phenomenon. Because last time around, we had a lot of talk about tariffs in the first Trump era. Biden got back in office and kind of closed that discussion for a while, at least except against China, more or less. And it could be the same I mean, if Trump is out of the door again in three years or whatever it is, four years, and a Democrat is back in the office, should we then just expect this to vanish into thin air again?

19:20Then you don't really have any big reasons to, then you can basically sit it through. That's kind of my point. So I think we'll see Trump pushing forward his agenda, retaliation, and then ultimately they figure out that he fucking means business this time around. That's at least how I, you know, that's my assessment of the situation. And then we'll get that low race to the bottom, I think. And I don't think, no matter who wins the next election, I don't think they're going to take this in a different direction. I think this is a new normal. I think both the Obama and Trump administration were sort of, the tone was very, very different against Europe.

19:56But the content of what they're messaging to Europe was very much the same. Don't trade so much with Russia. Rearm. Be careful with GDPR. You're going to stifle your own innovations, all that sort of thing. The same messaging, we didn't pay attention to that in Europe, and now we're getting punished for that. Yeah, and you said the Obama and the Trump administration, so you just leave Biden out. Yeah, yeah, yeah. That was the same, but I mean, going back to the 2020... I just checked whether you thought it was like a proxy Obama administration. Oh, no, not going to go into that one. No, no, no, with all those signatures.

20:30No, no, no, we're not going to go into that one. So Andreas, I just want while we're at tariffs to do a listener question, then we'll get back to the inflation and some trade ideas here. So a question from YouTube here. China has experienced Trump tariffs before and has sold U.S. treasuries. What will happen if more and more countries get fed up and choose another world reserve currency than the U.S. dollar? Maybe we can split that up a little bit. Yeah, so in terms of the latter first on the global reserve currency, the U.S. dollar, I kind of consider these trade deficits to be some sort of prerequisite for the status of the dollar so in that sense it will slowly but surely move the needle away from the dollar as the reserve currency all of the signals sent by the Trump administration on Bitcoin as well kind of speak in favor of the same conclusion but this is a slow moving process be aware of that it will take many many many decades to really move the needle but I get why this question is being brought up on a running basis.

21:28In terms of China selling treasuries and whether other countries could decide to do the same, bear in mind that you need to adjust for the market value changes of the treasury holdings of the so-called safe arm of People's Bank of China, the safest the investment arm of People's Bank of China. So yes, they've sold a little, but if you adjust for the market value changes because of higher bond yields, it's minuscule you know so they haven't really sold a lot on a trend basis it's basically a mark to market assessment that has brought down the value so they can obviously decide to sell treasuries and load up on gold instead for example if they want to remain within sort of the dollar system and you know that has been ongoing on a trend basis i think this is the exact reason why where 3k in gold um i think more countries could decide to do the same so on you know on a trend basis what could happen here is that uh on the margin investments will move from treasuries into into gold um and you know we've seen similar moves taken by um yeah other central banks in the global south but also actually a couple of interesting central banks um in in eastern europe for example, Poland has made a big move towards gold away from bonds, which is interesting because Poland, at least up until three months ago, was probably the country on earth with the most positive view of the U.S.

23:02They loved the U.S. And I sincerely mean it. If you're those of you guys who haven't visited Poland, you know, it's not super often you see foreign countries just loving the US, but they did that. They loved them. And also because of all of the defense arrangements and all of that. So there is something moving beneath the hood here. I have to agree with that, but it's a slow-moving process and it's only happening on the margin. Okay, Andreas, I want to talk inflation here. You mentioned this in your weekly post and you can find on the ProMacro stage of or level of real vision. It seems we can bring up this chart.

23:50There's a schism growing in inflation expectations, if you can call it that. We talked about the true inflation last week. On the other, in the light blue here, you have the University of Michigan survey for the next year. How can this divide be so big? Yeah, so Mike, You know, the question I've asked myself is whether we have a growing divide between perception and reality when it comes to inflation, right? Because trueflation is a daily gauge based on price scraping and, you know, live online prices of a lot of retailers and so on and so forth in the US. At least if we take their methodology at face value, I'm not here to represent their view or anything.

24:37But, you know, the trueflation measure has actually been going down. so if we take their methodology at face value it means that walmart and those companies they they do not increase their prices uh which contradicts with everything you read in the media right you know and try try to open wall street journal or ft or you know every single article is about rising inflation right now uh so i don't think it's really um you know it's not out of the out of this world to think that you know the perception of inflation is just wrong right now in many ways uh as you can see from the chart we've had a couple of such instances back in 22 23 where it was ultimately the survey that caught down to development in the inflation space um my best guess personally right now is that the truth is to be found in between which is you know uh i don't get a lot of high fives by by saying that no but i i think there's um at the you know at the late effect that we need to take into account here and my main working thesis right now is that you know all executives having read wall street journal and ft over the past three months they've been completely aware of this potential cliff just ahead of them uh from from a tariff perspective so they've obviously bought every single component that they had to buy ahead of these tariffs being implemented?

26:07Obviously, why wouldn't they? It brought everything to the US. That's why we've seen a new record trade deficit. That's why we've seen massive front running of these tariffs in various commodities and all of that. So the inventories in the US, they are booming with goods components being shipped into the US at old price levels. in practice that means it will take a while before price lists are updated towards the consumers so i guess you know we could have the vacuum now for say best guess a couple of months where inflation actually goes down and then ultimately we'll see the terrorist effects kicking in but it's not now um so yeah maybe that's an in-between conclusion i don't know but now for now inflation is probably a better reflection of what's ongoing, and then Truflation will likely pick up.

27:03So if you believe Truflation is right here, and the market sentiment is a lot higher, how do you leverage that? How do you trade that? Well, I guess that's a pretty decent sign to buy some U.S. risk assets right now. Say, if you have this vacuum of low inflation for a few months, it should provide some relief. And as I've told Unreal Vision and other platforms, we've slowly but surely started to accumulate a little bit um we've also done that ahead of the fed meeting this week uh let's see whether powell will kind of conclude the same as i just did like you know probably there's a vacuum we cannot do much but we'll just we'll just sit there and stare for a while which is not too bad i guess and then they'll end qt i think that's more or less a safe um uh safe conclusion ahead of wednesday as well uh and ultimately if If truflation is right here, maybe we can show this chart on bond yields versus truflation.

28:01I think there's some merit to the view that bond yields can drop quite a bit here. At the same time as equities performing, you'll get like a risk parity rally short term from here, if I'm right on that. And then we'll have to discuss when these tariff effects kick in, whether there is actually some inflation because of it. But for now, at least in live measures, we cannot really see it. It's perception. It's not reality. Okay, Andreas, a question here. We have a couple of charts as well on the conditions here. A question from Bernardo. Monthly data suggests the global liquidity expanding on a month-to-month basis and on the three-month annualized basis.

28:43If that's not fast enough for the demand, what do you think of this? When will this change? Sorry, I messed up the question a little bit. I think the question is, is the money base growing fast enough to foster demand and create some sort of positive spiral in markets. And I've taken notice of the same development, especially if you set aside the exchange rate effects of the US dollar. We've actually had a pretty decent trend in global M2. So we are seeing a growing money base, both in the US but also elsewhere. We're starting to see signs of a growing money base, at least a narrow money in China, even though just for the record if you've seen a chart of on chinese m1 doubling it's because they've changed the method to include parts of m2 and m3 at least m2 so nothing has changed in china they've just changed the way they calculate it so it's basically one big fake new shot if you ask me so no new money it's just a change of methodology but anyway when we look the global money supply, we are in a positive trend.

29:53And I think it takes a lot to move that in a negative direction. So this underlying liquidity cycle is actually doing okay because of the private money creation and setting all of this noise aside with Trump response from European pension funds and all of that. I still think that's pretty benign market trend if you set them all aside. so sure I think the money base is growing fast enough we just need the uncertainty to kind of dissipate a little bit for it to really be a trigger of market lose interesting Andreas I just want to shift to towards the end of the show here a couple of try and set you up for a couple of trade ideas yeah we've talked a little bit about financial conditions you brought on this chart that I really liked a two month leg in the DXY I guess the financial condition index.

30:48Yeah. What are you seeing here? How would you position for that? So this is back to the discussion on the US dollar versus liquidity, actually. It's just another way of showing it. And it really shows what matters here. Because the US dollar, as first of all, a global bellwether, but also as a source of liquidity for foreigners is very important. And when the dollar is incredibly strong, as we saw right after the election results became known and all of that and the tariff debacles and all of that, it becomes incredibly difficult for China, for Europe and other parts of the world to accumulate dollar liquidity because it's expensive.

31:33So when the dollar weakens, you're starting to see a much brighter sentiment and a much brighter tune, actually, to some extent from the authorities when it comes to liquidity and to monetary trends. Take a look at the message we've gotten from China this Sunday. they are now comfortable easing local fiscal and monetary policy because of a slightly less strong dollar. So that is why the light blue here, which is the dollar index, when it goes up in the chart, it means that the dollar weakens, it's flipped. It basically means that global financial conditions ease. First of all, because dollar liquidity cheapens.