Is the Administration using the threat of tariffs to manipulate the dollar to make US products more attractive abroad and foreign products more expensive at home?
A dollar gauge is on track for its worst performance during the first 100 days of a presidency in data going back to the Noxon era when the US abandoned the gold standard.
Bloomberg writes that the US dollar index lost about 9% between January 20 and today, the biggest loss since at least 1973.
Trump’s tariff rhetoric has led many to pile assets outside of the US, weakening the greenback while lifting gold.
The Treasury Secretary is a former FX Trader (currency), a trader who made billons with Soros shorting the British pound 30 years ago.
Will the US be regarded as a currency manipulator?
Most believe a strong dollar is essential for our massive $37 trillion debt. Lower currency exchange rates dictate higher interest rates.
However, there are only two ways to overcome massive debt; default/restructure or inflationary growth.
The only certainty to write is that today is different than yesterday, and the outcome is unquantifiable.
Changing topics, four of the Magnificent Seven post profits this week. Last week this cohort of seven companies surged 9% but is still down almost 20% YTD according to Blomberg.
The four companies—AAPL, AMZN, META and MSFT—comprise about 22% of the S & P 500 and the market is unlikely to forgive any earnings shortfalls in an already fearful market.
Bloomberg writes even with the massive volatility since early March, average profit growth of 15% for the Magnificent Seven has “barely budged since the beginning of March suggesting no room for error.”
The mania in AI may also come under scrutiny because these same four mega caps are expected to pour over $300 billion into such capital expenditures for the year.
Commenting on yesterday’s market action, the averages were mixed as the NASDAQ declined about 0.5% while the Dow was essentially unchanged.
Longer dated Treasuries were almost unchanged but shorter maturities rallied causing a nominal steepening in the curve.
Last night the foreign markets were mixed. London was up 0.09%, Paris down 0.33% and Frankfurt up 0.49%. China was down 0.05%, Japan up 0.38% and Hang Seng up 0.16%.
Dow and NASDAQ futures are up 0.35% and down 0.20%, respectively ahead of several key earnings and economic reports. The 10-year is off 5/32 to yield 4.23%.
