Is Trump’s Plan Working? | Mikkel Rosenvold & Andreas Steno Larsen | Macro Mondays
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Hello out there. Welcome to another edition of Macro Mondays. My name is Milos Zonal and we're sending to you live from Copenhagen. I am joined in the studio by you, Andreas. Just dropped the phone there like a teenage girl. Now it's time to be on. But there was some reasoning to it. Let's just drive straight into the ISM services report. Just fresh out of the press. I'm honestly a little bit surprised that

It's the second ISM report in a row that surprises us on the upside. And, you know, we've obviously been stuck in discussions for the past month on whether these tariffs from Liberation Day would create some sort of soft impact on the U.S. economy. But for now, the U.S. economy, you know, the numbers are not good, but they're not that bad either. You know, so we're talking about some sort of middle ground here where, you

And it's not really deteriorating at the pace that most economists would have expected, at least given the size of these tariffs and so on and so forth. So, well, it kind of fuels the whole notion that, well, maybe the bottom is already in, which we've basically seen two, three weeks in a row. Yeah, we'll get back to that and dive much more into the status of the U.S. economy, what's actually going on underneath the hood.

Remember, as always, that this is a sneak peek into the analysis and research that we do and publish, among other places, at Real Vision. You can get full access to Andreas' thoughts and the publications of our team with the Pro Macro tier service

subscription plan in there. You just released your StenoSignals today. That's part of the package. We are releasing the drill every Tuesday with a focus on geopolitics and commodities, especially energy as well. And on Friday, we have an update on the portfolio and what we told hedge funds for the past week. So a lot of good stuff in there. Hi, Raoul here.

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This is our weekly free show where we give you a sneak peek into our review and try and cut through the noises in global macro. Remember our usual catchphrase slash disclaimer that even though we like to think that we're quite thorough in what we do in Dreyas, our trade ideas might be... Sometimes it may be good, sometimes it may be shit.

that's it good old genaro we we got a lot of messages for on him uh i was uh i was criticized very much by by listening talking and said

You keep bringing on Milan Juventus guys and the podcast. Why no Inter guys? And I'm actually an Inter guy myself. Italian football. So just another little disclaimer there, Andreas. Okay. But this guy, Gennaro Gattuso, who's basically the guy behind our disclaimer here, almost annihilated a Swiss journalist. Was it a Croatian journalist the other week? I received that link. I received that link from like hundreds of viewers of this show.

he went completely nuts at some journalists. Wonderful. Great, great, great soundbite and audio clip. Yeah. Very, very poor show, man. Should we hear our hosting by me today?

that I hadn't prepared that clip. But anyway, you can find it for yourselves. Andreas, let's get back to macro here. We just touched upon the ISM services report. Perhaps a good link to talk about a tweet today from or truth from Donald Trump. Now moving the terrorist discussion into services space. That's one takeaway from this truth. We have it on the screen here.

The movie industry in America is dying a very fast death. I'm not quite sure the numbers support that, but anyway, he's proposing 100% tariffs on any and all movies coming into our country that are produced in foreign lands.

And Andreas, this is where things get tricky because when you're talking goods, you usually have some sort of physical product that you can say, okay, now it's crossed the border. Yeah. With movies, I mean, back in the days, I remember my father was an operator at a cinema. You would get the movies like a physical copy of the movies. I don't think you do that anymore, especially via Netflix, et cetera. What do you make of this? Why now? Why this focus? I don't know. And that's the honest answer.

If you look at a company like Netflix, it's basically been on a tier for a while in equity markets. And look at the production origin of many of their series. We're talking about maybe 50% of all of the content in Netflix being produced outside of the US. We're talking all park numbers here, right? And let's suppose that Netflix recalls a series in...

Italy or in Korea, they've done that. I suppose that is essentially what Trump is after here. If it's viewed in the US, perhaps. Potentially, right? So it is much trickier to figure out how to, in a proper manner, put tariffs on stuff like this. And ultimately, I think the only way you can do it is to look at the quote-unquote...

mother company of the production. So in the case of Netflix, if they record something in local language, I don't think it will be tariffed because it will not be shown in the US, most likely. Not viewed anywhere. Yeah, not viewed. But if they're recording, say, a series around the mafia in Italy...

In English. I think that will be prone to tariffs. At least that's how I understand it. But you're absolutely spot on, Mikkel. The point here is that this is the first attempt of actually taxing services crossing borders. It's relatively rare that you do so because it's so difficult. And on top of it,

It's actually one of the areas of the economy where you typically see a surplus in the US trade-wise versus, for example, Europe. A huge surplus. Yes. When we're talking movies and the likes, because of Netflix, HBO, etc., we're talking a huge surplus. We don't really have any streaming services in Europe, not worth mentioning, right? So this is really odd in many ways because it kind of...

It's very out of context, given the reciprocal concept that was launched, say, three, four weeks ago, right? Because reciprocal tariffs on services would basically mean that Europe would have to put tariffs on the US and not vice versa. Yeah. Which is why I don't really get why this topic is all of a sudden important to the administration. So...

The point here is, and we'll see whether Europe dares to retaliate, but they should retaliate on this, in my opinion, because we're talking about a corner of the economy where there is actually surplus from the US going to the Eurozone. There is some symbolic value to this, and some political value to this, because...

Sort of a stereotypical analysis. Who in the US would watch a French language niche movie? The Harvard guys, the university professors on each coast. Perhaps that's the narrative here, that if you watch European movies, you're probably not voting for Trump. So this is a tax on the... Yeah, on...

On the western east coast leads. I don't know. I don't know where this is coming from. But anyway, huge topic today. Andres, before we get back to the sort of deep diving into the US economy, we have a couple of very, very interesting charts you sent me earlier today. First, let's take this. This is the dollar versus the... $500. $500.

the time with each dollar yeah what's this drop off we we see at the end of the curve here what's going on well so basically we've seen two sessions in a row with a much stronger taiwanese dollar versus the us dollar we've also seen a stronger korean wong we've seen a stronger chinese yuan we've seen a stronger japanese yen etc versus the us dollar but this is out of uh yeah out of

yeah any any scope that i've ever seen from the time in east dollar we're talking about a move of seven eight standard deviations something like that it's it's a crazy move because it's typically a very stable currency pair um so what's going on well i have a thesis uh it's not like we've gotten a lot of flow information out of uh taiwan yet but

the taiwanese life and insurance companies are fairly large they have a large pension fund system which is by the way pretty normal in asia and we know that many of these institutions have invested in the us on unhedged basis so basically if they buy a listed stock or a u.s treasury they haven't hedged that to the extent that they've usually done say decades back

And, you know, we've seen a weaker dollar against many currencies worldwide, basically since Donald Trump started talking about laying off Jay Powell and the whole discussion around whether interest rates needed to be cut in the US and all that happening. But this happens with kind of a time lag to the rest of the world. And I think we're seeing, you know,

in danish we would call it a ketchup effect when when you know when the bottle is off the heinz ketchup bottle uh and then then all of a sudden everyone needs to hedge their dollar exposure at the same time and i basically think that's what's happening here um another thesis is that the us administration is trying to orchestrate trade deals with countries around china including

a weaker dollar versus the local currencies to try and corner China. And I think there's some merit to that, but Taiwan explicitly stated today

This is not the reason. And, you know, there's an old saying, unless something has been explicitly stated by the Kremlin, then Russia do not trust it, right? You know what I mean, right? When you... Yeah, sorry, explicitly denied, right? So when they explicitly deny this, it could be because they're negotiating around this exact topic. I don't know. But...

The whole point here is that everything we talked about in relation to this trade policy from the US administration, that all roads led to a weaker dollar as a consequence of these negotiations, I think it's happening right in front of us right now. A weaker dollar versus the euro, a weaker dollar versus many Asian counterparts. It is exactly what the Trump administration wants.

Yeah. And they're maybe not telling it explicitly to the public, but that is basically the whole purpose of this exercise. And it's basically all you need to know when you're an investor right now that they're trying to orchestrate some sort of coordinated easing of the dollar. That seems crystal clear right now.

No matter the reason why the dollar is weakening versus the Taiwanese dollar, it is to some extent linked to this whole terrorist policy negotiation process. And how's that linked, Andreas, to a tweet you made earlier today that the Chinese are now buying US treasuries again? You saw some signs of that. We have a chat from Hong Kong here as well. How's that linked to that? So, you know, it was...

Kind of a clickbaity tweet, but still there's some merit to it and some substance to it. So we've obviously been stuck in discussions on whether the rest of the world would start selling U.S. treasuries to try and cope with the pressure of the U.S. administration and all the trade negotiations ongoing.

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The point here is that the dollar is now sufficiently weak for trading.

manage currency regimes such as the Hong Kong dollar to end up in a situation where they need to buy US dollars.

So what you see in the chart here is that the Hong Kong dollar is managed versus the dollar. So when we're at the top of the board, it means that the dollar is strong. It's against the ceiling. And when we're at the very bottom of this chart, we're basically trading at floor levels. And when we are trading at floor levels in the dollar versus the Hong Kong dollar, they need to buy US dollars to ensure that it doesn't drop below that floor level.

When you buy dollars as a foreign central bank, it basically means that you accumulate dollars in your foreign FX reserve. When you have more dollars in your reserve, you need to invest those dollars in something. There you go, US treasuries or potentially gold, right? So the whole exercise, and again, let me just underscore this once again, the whole exercise

behind this terrorist plan, at least from a monetary perspective, is to weaken the dollar to allow foreigners to accumulate dollars and buy US treasuries again. Because they haven't bought any treasuries for a decade, more or less. The amount of foreign ownership is dropping relatively to domestic ownership. And that's an issue. So I actually think, you know, despite some...

despite the global outrage, despite, you know, the flip-floppy implementation of all of these attempts to negotiate with the rest of the world, I actually think the bottom line is okay-ish for the U.S. administration now. And they are...

Yet they're doing much better than what is being reported by the media around the world. Absolutely. They seem to be getting away with this. We're getting signals that they're getting close to some trade deals. And I mean, that's not going to be trade deals in the original or the previous sense of the word, because those took years to do. So these are going to be much, much lighter trade deals, probably aimed at sort of settling this issue, get onto other stuff.

probably getting something in return for lowering the tariffs. I just wanted to bring on this chat as well, Andreas, just to finish off the talk on the trade war.

We're seeing some stabilization level of container ships from China to the US, but we haven't seen a full recovery yet. Tiny pickup if you... Updated live, tiny, tiny pickup. But there is an early hint that the shipping is actually... So goods are flowing from China to the US. Are these ships are being... Are they departing to China? You know, a slight tick up. And why so focused on that? Well...

I think it was roughly 10 days ago, Chinese state media started writing stories about Walmart, Home Depot and the likes, telling their counterparts in China to just, you know, send the ships basically. And I guess, you know, between the lines, you could kind of read that as a growing optimism among executives saying,

in these US retailers of some sort of conciliatory outcome of the trade negotiations over the next 30 to 45 days. It takes a while before you'll reach US docks, right, with these ships. And that's basically, you know, the ultimate deadline for the customs. So I think what we're seeing right now is a growing optimism that

that will have some sort of conciliatory outcome, say over the next one or two weeks. Stephen Miran went on Bloomberg, I think on Friday, stating that he would be surprised not to see tariffs level lower in one or two weeks from now. So all the signals we're getting points towards a de-escalation or a dial back in some shape or form of tariffs here.

Remember, listen, to post your questions wherever you're watching this, whether on YouTube, Twitter, or on Real Vision. We can take them live on air. I should have mentioned it earlier in the show, but you still have time for that. Anyway, Andreas. Mikkel, can I spend one minute more on this dollar Hong Kong chart? Because if we bring it up again, I think this is so important also from the perspective of investing in the U.S. versus outside of the U.S. What we've seen over the past two or three years

is that Chinese monetary authorities, Indian monetary authorities, and other big players in the global south, they've been busy defending their currency against a too strong US dollar. And when they do so, they need to sell US dollars and ultimately also need to sell some of the papers behind their US dollars, namely US treasuries.

the us dollar is incredibly overvalued when you look at it from a purchasing power parity perspective uh various other models of long-term assessments of fair value also put the dollar maybe 10 15 even 20 percent above fair value so it was one of the most important tasks for this administration to try and fix that issue because obviously when you have a too strong dollar

And the dollar has been strengthening on a trend basis versus many of these large emerging economies. You just grow and grow and grow your deficit versus these economies because you're getting less and less and less competitive from a foreign exchange perspective, right? And take a look at the exchange rate versus the R&R, the Indian currency. Take a look at the exchange rate versus the Chinese yuan. It's been one-way traffic for many years.

And this is the first time in basically since the early innings of the pandemic that we've actually seen the pressure in the opposite direction. And I think it's very, very important because ultimately it means that financial conditions ease when the dollar softens as it does.

it means that these economies worldwide, they gain relative strength from an import perspective, meaning that they can actually buy more in the US relative to what they were able to just a month ago. And

In many ways, it's a very upbeat scenario for the world economy. And think of this, Mikkel, in conjunction to this. The oil price is currently in the bin, basically. Over the weekend, OPEC decided to increase production. I know we'll get back to that discussion in a second. But we have the relevant benchmark index in the US for oil below $60. Let's just for a second entertain this thought.

we'll get almost a complete dial back on terrorists versus China in an economy that is now fueled with much, much lower input prices from oil, gasoline, many commodities, right? That's a super, super upbeat scenario. And, you know,

If you read the research from many investment banks right now, they're telling you that the world will end because of these tariffs. But if you dial back the issue and pair that with input costs that are much lower, a dollar that is much weaker, you have a plethora of opportunity here.

So I'm, you know, I think the economic consensus is damn wrong. Once again, that's basically interesting. So essentially, Andreas, we're talking about the terrorist questions. Is that? Well, probably. Yes. As an investor anyway. And, you know, Trump also took laying off Powell off the table again now. And, you know, it's,

It's just so typical Trump. You know, he's got away with saying a lot of stuff and, you know, trying to put pressure on people by, you know, publicly announcing that he's considering laying them off. And then he pulls back from it. And, you know, let's see on Wednesday. We obviously have the FOMC meeting coming up. Politics aside, his approval rating is not looking very, very good at the moment. But politics aside, he seems to have

forge their way out of these tariffs. But one thing that's very, very certain is that approval ratings, they lack equity markets and crypto markets. They do. I remember that...

We had three or four years in a row with a weaker Swedish crown. It's an East case, but just underscoring my point on the opinion polls. And it weakened and weakened and weakened. And during that time span, all of a sudden, the population in Sweden was in favor of joining the Eurozone. They wanted to get the euro because it was suddenly much more expensive to travel to the rest of Europe.

When that tide turned and the Swedish crown started strengthening, we've seen that this year, the opinion polls also started turning. No, no, no, we don't want that shitty currency, right? Because it's weakening. So opinion polls lack the financial reality in many ways. Because if you're an average Joe, you look at your bank account, you look at your portfolio, right? And it influences your opinion. It just does.

So Andreas, if we are beyond tariffs now, I know that's a little bit of a stretch, but anyway, maybe we can get back to some honest to God macro analysis here. We just, we touched upon earlier in the show, the outlook for the US economy. We had a couple of numbers last week from the non-farm payrolls, the ISM. Are we positioned for a bull run heading into the summer or what's your expectation? Yeah, I think so. Yeah.

This is one of the most hated rallies I've seen. And I can guarantee you that a lot of professional investors are not...

part of the party right now, which is always an issue because if you're a professional investor and you see this sudden comeback, you need to chase it because you're all of a sudden running behind in a sense. So I think it's one of the most hated rallies I've ever seen. And again, we've used this analogy of March 2020 all the way through April. And this feels very much...

Like the market did, say, in April, May 2020, where people were like, ah, this doesn't feel right to buy stuff here, right? Because we've just had a lockdown and we're still in kind of a lockdown. We're also still in a trade lockdown. Global trade war between the US and China. But the sequential news from here will be better, which is all you need as an investor, right? You can look through a lot of noise if the news flow is improving.

And I guess that's basically where we are. In my opinion, Andreas, one of the big jokers to look out for that I'm still very, very uncertain about is, are we going to get a rate cut? We had a question from a listener here. What are your takes on the Fed this week? Because this data from last week, does that support a rate cut? Well, I think I said, was it a week ago, two weeks ago on this show, that the data would provide a crystal clear case for Powell come June.

And I still think that's the case. But, you know, we already have the meeting on Wednesday and the data is not crystal clear right now. I have to admit that. So no, on Wednesday, we won't get any major clarity. Especially employment numbers. Yeah. So by June, they'll have another month of data. And I think the data will be sufficiently soft for them to move in June. Yes. Even though the market is not convinced right now of the June cut. But I mean,

They're mostly scared of cutting because of tariffs. And if we slowly but surely get tariffs lowered from here, which is most likely, I think, should be good news for the Federal Reserve. But I think there's a big caveat, and that's also one of the questions we get on the board here, on services and the risk of retaliation on U.S. cloud services and U.S. AI. And

I think that question is more or less spot on. We're obviously talking about retaliation to this Netflix tariff mentioned initially in the show. The European Union holds, they don't hold the cards. They don't have the cards, but they have one card.

And that is a digital tariff on cloud services because everything related to government data is hosted by a US company ultimately. More or less everything. You know that as well. Absolutely. Absolutely. And it's, I mean...

We've had it in the portfolio for a while. The European digital infrastructure companies, especially... Doing very, very well. Extremely well. And this is a case... You can make the point from so many cases. It's a defense issue, national security issue. The U.S. have asked us to take our own security measures

to take responsibility for that. That includes setting up our own hosting and cloud services, at the very least for government services and defense services. This only strengthens it. If we're beginning to see tariffs on services, why not?

So this makes so much sense, this bet, and there's so much tailwind to it still. Yeah, it's actually one of the stocks that haven't really responded to this relief rally, NVIDIA. And I think there's a reason for that. It's not doing that bad, but it's not rebounding as we've seen other parts of the market do.

So I think there is some merit to this view that there is a risk that we see retaliation on the digital services front. I still think you should just take a deep breath from the European Union here, because in my view, I still have a feeling that Trump is trying to find a way out of this trade war. And he's trying to make this more about domestic politics. And that's what he's doing here as well. He's trying to...

Because people have this, as I mentioned before, the stereotype that people watching French movies, they're usually living in San Francisco or a country like that. Or his whole war against Harvard. I think he's shifting his policy focus. The more he puts, because he has not... His success rate on the foreign, on the global stage, has been very, very poor. So I still think that... At least on the surface, but they're actually doing better on this...

whole dollar US Treasury question than what is being reported. On a monitor, yeah, absolutely. But I mean, most voters aren't going to notice that, at least not initially. And you are getting heavy pressure, as saw Margaret Taylor Greene,

You can laugh at all you want, but she has a bellwether for how the Republican base is feeling about things. She's not criticizing Trump in any way, but she's criticizing his administration for not getting any of these wars stopped and getting Trump involved in more wars. So there is a bit of...

positioning within the Republican Party because they're going to the polls much sooner than Trump is or Trump's successor is. So anyway, very, very interesting from a political standpoint. And that's maybe the final point I'll make today, Michael, in relation to this whole dollar discussion, the US Treasury holdings of foreigners. The sanctions on Russia, you know, after the invasion of Ukraine,

we, and I say we as Westerners, basically seized the Russian ethics reserves. And that was the exact point where gold started disconnecting from fundamentals. Every single central bank in the global south started buying gold as a consequence because you cannot confiscate physical gold, at least not without boots on the ground. And I think this is one of the key questions for these negotiations with Russia. Will all sanctions be lifted?

on Russian reserves. Because in case all sanctions are lifted, I actually think it's a big event for the gold market in a negative sense. So it's one thing to watch. We have gold in the portfolio. If you want to check out the names we mentioned on the European digital infrastructure space, we've done very, very well there. Go have a look in the global pro macro tier. Isn't that what it's called? Yes.

So, Andreas, we've used up a lot of time, plenty to talk about. Maybe we should just do a very quick recap here.

The tough question is done. Yeah, at least, you know, the market is looking at less as long as we get sequential positive news. Back to looking at macro fundamentals, possibility for a bull run heading into the summer. Bitcoin not looking too shabby at that. Lots to talk about. I'm sure other shows in Real Vision will catch up on this as well during the week. So that's all we had for you this week. Thanks a lot for your questions. Please keep them coming. We'll grab some of them for next week as well.

Thanks to you, Andreas, for joining here. And as always, we'll be back next week. If you liked this episode, I'd love for you to head over to realvision.com forward slash join for a free membership. Start your journey today to unfuck your future. Just one click away.

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