There is a lot of consequential data out this week. We will get the preliminary Markit PMIs for the month of April and a couple of Regional PMIs as well. Friday will bring the revised version of the Michigan Sentiment data including those relating to inflation expectations. Friendly reminder that inflation expectations began to rise in the survey back in January. This was initially dismissed as partisan. February’s figures were also higher, and this time independents also contributed to the rise. In the last report, even Republicans lifted their expectations of inflation. Inflation is a democratic force as it impacts everyone, irrespective of political affiliation. Keep an eye out for this one on Friday.

The Macro Week In Review

Apply For The M²SD Scholars Program:

Are you a college student looking to stand out? Learn More And Apply Here!

The Macro Week Ahead

☎️ “Waiting On A Call From You”

HBO’s masterpiece, The Sopranos, concludes Season 2 by playing a Rolling Stone’s song called “Thru and Thru” during the final scene. As viewers reel from the “passing” of Salvatore Bonpensiero, we’re greeted with, “any minute any hour, I’m waiting on a call from you.”  While the U.S. tariffs went full steam ahead last week, President Trump signaled possible negotiations with President Xi Jinping. “We are waiting for their call,” said Trump.

🛏️ Going To The Mattresses …

Trade turmoil accelerated last week with China halting the delivery of Boeing jets and the U.S. hitting back with proposed fees on Chinese ships docking at U.S. Ports. A WSJ article on Tuesday indicated that the U.S. is attempting to use global tariff negotiations to galvanize more than 70 nations against China. This involves halting Chinese shipments through their trade lanes, which would prevent China from bypassing tariffs, and restricting low-cost Chinese goods into their countries. As a counter, President Xi Jinping is fighting for solidarity in Asia, as he visited Vietnam, Cambodia, and Malaysia last week.

These developments suggest we are on the precipice of a new geopolitical regime – the East vs. the West. This news strikes us as the early innings of a potential realignment of global trade. For U.S. equity markets, higher fiscal and geopolitical uncertainty likely restrains consumer spending, hiring plans, capex, and, ultimately, corporate earnings.   

👑 A New Don of Monetary Policy?

Donald Trump sent more shockwaves through financial markets as he suggested Jerome Powell resign early. “He would quit if I asked him to.” The President was also quoted as saying his policy actions are “always too late.” Regardless, the President is unlikely to get the potential benefits of easing monetary policy up against the redrawing of global trade routes and a 7% budget deficit at peak employment. 

Followers of our research are familiar with our criticism of the Fed. There is some truth to the President’s “late” statement visa-vi “transitory” inflation in 2021. That said, should Powell end up resigning ahead of his term’s expiration next year, that would signal an end to the Fed’s independence from Washington. With global investors already selling dollar-denominated assets in this new political regime, Powell stepping down under the weight of Trump would be more rationale for a continued exodus.

🏇 Handicapping Last Week

Last week, we saw more stagflationary readings out of Empire Manufacturing and the Philly Fed. New Orders from Philly dove to -34 in April. This was down from 8 in March and 41 in January. This level of the index is comparable to levels seen during the pandemic, the Global Financial Crisis, and the bursting of the Tech Bubble. The Prices Paid component continues to rise to new highs as suppliers contemplate new pricing mechanisms up against the weight of tariffs. 

The NAHB housing index for April sits at a depressed level of 40 due to poor affordability. However, according to the release, “the majority of builders are reporting cost increases on building materials due to tariffs.” Some builders estimate home construction costs could rise by ~$11,000 due to tariffs. Not too severe relative to the price of a home, but repair and remodel projects likely move even higher as Home Depot is one of the largest importers in the U.S.

The hard data is hanging in there – for now. Retail Sales (nominal) improved 4.6% y/y for March and 3.4% if we strip out food and motor vehicles. Automobile sales improved 9.2% y/y as consumers potentially front-run tariff price increases. Johnson Redbook Retail Sales Index also increased 6.6% y/y for the week of April 11th, potentially speaking to more pre-buying activity. The employment market remains virtually unchanged from tariff activity thus far, with one LEI of employment, Initial Claims, at a muted 215k.

Macro Job Board

VP, Quantitative Investment Strategies Research @ Morgan Stanley (New York)

Conduct independent research on quantitative investment strategies across all asset classes with a focus on volatility in macro assets and equities. Experience in non-linear systematic strategies involving options for alpha generation or hedging is required.

Senior Global Macro Research Strategist @ Citi (New York)

Expected to collect, outline and explain information giving insights that drive creative solutions in the Macro environment in which our clients businesses operate. Their insights provide clarity the client needs to make investment decisions.

Global Macro Research Analyst @ Goldman Sachs (Washington, DC)

This candidate will closely monitor political and policy developments 
and assist economists to publish timely and innovative research on macroeconomic, political, and policy developments and their economic impact. They will also work on economic research projects and publications.

What We Read This Weekend

💸 Trump Push Against Fed’s Powell Is Latest Reason to Sell America

📈 Gold Soars To Record High On Trade War Concerns, Weaker Dollar

💲 The Truth About The U.S. Economy And The Dollar

Have feedback? Simply reply to this email to tell us what you like and don’t like about Macro Mondays!