The Gentleman is for turning
Tariffs are still in mega-shock terrain: US average tariffs after April 10 volte face are 26% Vs 3% when President Trump took office. That’s 1% higher than if reciprocal tariffs had been implemented.
What has changed is that Trump behaviour shows him to be less ideological and more susceptible to market and political pressure – particularly if the Treasury market shows signs of freezing up (Base trades) or risks losing its “safe haven” status.
Risks are now binary instead of just bad. For things to get better US Tariffs on China would have to be revoked. It is unlikely that China wilk kowtow enough and tariffs are emotional. So uncertainty has not changed.
The combination of the level of tariffs and the level of uncertainty will produce stagflation (or worse in the US) and flatlining in the EU & Japan. China will lose 2% of growth unless tariffs are reversed quickly. This is no bull market. But US markets already assume that China tariffs will be revoked (see Apple share performance!). I do not.
Thus there have been few changes in the Wealth Preservation at the end of this report – except to swap US Treasury two year holding (as a cash surrogate) into 2 yr Bunds.