Yesterday was a relatively quiet day. As widely noted, the April tariff induced equity swoon has been reversed with tech doing almost all of the heavy lifting. According to Bloomberg the “giants” are up about 33% further stating that not all of the “heavy weights” are pulling their fair share. This comment further morphed into the complacency of the markets and the gargantuan amount of monies gravitating into fewer and fewer names. The Newswire cynically wrote “What can go wrong here?”
Last week was supposed to be the week the data was expected to show a sharp tariff induced deterioration. It is not yet occurring.
This week the anticipated inflationary pressures are thought to be exhibited in various pricing indicators including the PPI and CPI. What will the statistics suggest?
Perhaps of more significance are the 10 and 30-year Treasury auction. Many are warning about fiscal unsustainability. Spending must be reduced. What will be the demand? Will the government intervene as was the case during last month’s auctions?
About two years ago the federal deficit was $31 trillion. Today it is broaching $37 trillion. To place this data into perspective the total national debt in 2004 was about $ 7 trillion.
The President has picked the trade deficit as his top legislative and political battle. A growing cadre believe it should be the budget deficit.
Contrary to the prevailing wisdom, the bond market does rule and almost everything else is ancillary.
What will happen today?
Last night the foreign markets were down. London was up 0.44%, Paris down 0.04% and Frankfurt down 0.43%. China was down 0.44%, Japan up 0.32% and Hang Seng down 0.08%.
Futures are flat as trade talks with China is continuing. The 10-year is up 7/32 to yield 4.45%.
