Republicans are racing to finish the draft budget by Memorial Day at the end of the month. Bond investors can be forgiven for getting nervous about who is going to pay the bill for Trump’s tariff war and tax cuts.
Chemicals and the Economy
Apple set for double hit from Trump’s tariff war
China is Trump’s main target. He has claimed that China will pay the extra cost. But US consumers know better. They rushed to buy in March before prices rose. Q1 US sales were up 12% as Apple flew-in 1.5m iPhones ahead of the start of the tariffs.
Sell in May, and go away?
President Trump’s Tariff War will soon lead to empty shelves at Wal-Mart, Target, Home Depot and many other stores this month. The famous saying “Well in May and go away” might be a prudent policy for investors.
Companies have less than 90 days to plan for the Trump 2.0 Tariff War
The key issue for your Action Plan is to focus on demand. 3 key questions dominate: Will your customers survive the Tariff War? Will your suppliers survive the Tariff War? What can you do to help them survive?
President Trump’s trade war risks crashing the global economy
Clearly, the US is most at risk from all these changes. Its ‘soft power’ depends on its global reputation. And its ‘hard power’ depends on its global alliances. But President Reagan’s warning applies to all of us: “Then the worst happens: Markets shrink and collapse; businesses and industries shut down; and millions of people lose their jobs.”
China risks entering a debt trap as its housing bubble continues to deflate
Deflation means the real value of debt increases. This is the opposite of what happens with inflation, when its real value reduces. China’s ageing and falling population therefore risks entering a debt trap. More and more money will be needed to refinance existing debt, accelerating the slowdown in the wider economy.
Prepare for the coming crisis
As the head of Germany’s Employers’ Associations warned last month: “We are facing the biggest crisis the post-war Federal Republic has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years”.
The chemicals industry continues to be the best leading indicator for the global economy
Central banks and investors believed stimulus programs had created a “New Paradigm” where asset prices would always increase. Now they are starting to realise that stimulus is irrelevant against the 3 Horsemen of the Apocalypse – China’s continuing battle with the pandemic, Russia’s invasion of Ukraine, and potential for famine as rising gas/fertilizer prices mean farmers can’t afford to grow their crops or feed their animals.
Time to focus on the danger of corporate and household leverage as “subprime on steroids” comes to an end
The seeming genius of many private equity funds in recent years has been based on this ability to borrow at cheap rates during the ‘up’ part of the business cycle. Now we are heading into the ‘down’ cycle. And the central banks have abandoned Bernanke Theory and are back to worrying about inflation. So today’s excess leverage means many over-leveraged companies will go bust.
Everyone “knows” that the Fed will never let markets fall – and that China will never burst its real estate bubble
Our pH Report Sentiment Index has been a very reliable guide to the S&P 500 in recent years. Now it is suggesting a major downturn may be underway as the US and Chinese stimulus programmes come to an end.
Jump to page: