Have We Reached the Bottom in Equities? Macro Monday ft. Andreas Steno & Mikkel Rosenvold
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Hello, everyone. Hello out there and welcome to another edition of Macro Mondays. My name is Mikkel Rosenwald and we're sending to you live from the Copenhagen Sauna Club here. Welcome to you as well, Andreas, my usual partner in crime here. Thank you very much, Mikkel. I think I'm the only person who managed to puke more than Markets did last week. So I'm finally back and I'm alive and kicking, but my portfolio is

It's not doing overly well. We've managed okay given this turbulence, but it's been tiring as beep to say the least over the past couple of weeks, to be honest. So let's see whether there's some light at the end of the tunnel after this week.

Absolutely. Thanks a lot for tuning into the show. We are contributors to Real Vision, obviously. This is our live weekly sneak peek into the analysis that we do. Full disclaimer, sometimes forget to mention that we also run our own strategies, then a global macro, just so you people know that. No advertisements for that, obviously. And also just remember, we try to throw you our best macroeconomical ideas and tips, sometimes some trade ideas. But remember, we're not going to be talking about

About our trade ideas, as usual, they might be... Sometimes it may be good, sometimes it may be shit. Absolutely. So, Andreas, finally a week where we can actually talk some honest-to-God macroeconomical analysis here. Aside from all the headline hockey we've been playing the past few weeks. It's been quite a ride. We're still heavy, heavy times in equity space. What's on your radar right now? So...

First of all, and I don't think we should spend too much time talking about tariffs today because I cannot answer any questions on tariffs anymore. We don't know. No one knows the extent. No one knows the timing of anything. I'm not even sure Donald Trump knows anything about it himself anymore. So I guess this uncertainty related to what's actually going to happen is what's really...

making markets suffer big time at the moment. I, you know, I made a very simple study based on some of the well-known uncertainty indices out there. And I know you've brought a chart on it, Michael. And, you know, everywhere I look in these uncertainty indices, we're talking about close to peak trade uncertainty, close to peak policy uncertainty, close to peak policy

a tariffs uncertainty you know and and it's much worse than it was during the first trump era and i guess the the reason is that the extent is widening compared to the first era uh but also you know it just seems so unclear when to expect some clarity um negotiations are ongoing with between trump and everyone on earth it seems right more or less every single trade counterpart

We'll have to obey to some of the demands from the U.S. administration before we get anything in return. And it's just a struggle. By the end of the day, and I'd like to stress that today, I think what's going on right now is that the Trump administration is forcefully trying to bring the dollar and dollar bond yields down.

And they're succeeding now. That's at least a positive angle on all of this. We're seeing bond yields coming lower. We're seeing the dollar selling off. I think it's the worst sell-off in the dollar, yeah, basically for a couple of years, what we saw last week. And everyone I talk to within the hedge fund industry, within the asset management industry, they just tell me, okay, it's very, very difficult to load up on U.S. assets right now because...

Why should I? That's basically the answer, right? Why should I? Given how he's treating his counterparts, given how he's communicating around short-term paying being okay now. That was not the initial message, but it's clearly the message now. So they're aiming at creating some sort of soft outcome for the US economy in nine to 12 months from now, not right now. That's a pivot in many ways, rhetorically, in my opinion.

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Yeah, because when Trump entered office, he talked about this being the golden age. My prediction was that we were going to have four years of full throttle and everything. Is this sort of a rationalization after the fact? Because also, I think we're beginning to see some cracks in this because Donald Trump is lashing out at the globalists for causing this sell-off. Is there a limit to how much of a Trump session he can stomach?

I think there's a window of opportunity for him here, given how both the dollar and dollar bond deals work with the time lag in terms of easing financial conditions. It may actually make sense if he's on top of these lead lag patterns to do something about bond deals and the dollar now to ensure that the economy is firing ahead of the

And, you know, typical lead-lack patterns would suggest that we already within, say, three months from now start to see the first signs of some sort of recovery because of a weaker dollar, because of lower bond yields. And, you know, that's probably what they're aiming for here.

At least I struggle to understand what they're doing if that's not what they're trying to obtain here. And some of the very forward-looking charts we monitor are starting to look pretty upbeat for the second half of the year now. Maybe already for May, there about because of a weaker dollar, because of lower bond yields,

And, you know, I think the initial attempt from Trump was basically to try and get Jay Powell and his ill to play ball, right. To get them to cut interest rates and all that, but they, they will, you know, refuse to do so because of the terrorist uncertainty. So instead Scott Besson told him, okay, let's try to bring long-term bond yields lower by doing some, you know, pretty harsh stuff, trying to balance the budget, all of that. I'm not sure whether they will succeed, but they'll give it a shot.

And, you know, that's a more medium-term play. That's not a short-term play to try and balance the budget. It's not a short-term play to lay off people in the public sector. It's really not a short-term play. It's a medium-term play. So the time horizon of all of this has sort of shifted. And that's what we need to understand as investors. So, Andreas, before we get to some user questions, and thanks a lot for those. Keep them coming. The button in all this. Late Q2, we see...

a realist on trends or is that the conclusion okay um first of all we have the cpi coming up this week uh we'll get back to the details in a second uh obviously if we get some really soft numbers um we'll get a relief rally i'm kind of in that camp again this month um for a lot of reasons so i think there's an opportunity to get a bear market rally um but i'm still

unconvinced that we'll get like a more sustained rally until we get on the other half of the tax season in April. So I think May is a pretty good timing to look for right now. I'm not talking about a landslide from here. I'm talking about, you know, a struggle to really regain momentum. And I think, you know, we've seen it before that April tax season is pretty nasty when we've had strong returns to the year prior because people will have to pay taxes based on last year's returns.

We need to get that out of the way as well before really turning the tide here. So I remain unconvinced that we've really passed some sort of, you know, we're not past the nastiness yet. And we still have the debt line and reciprocal tariffs and all of that shit upcoming in April. True. Is Trump banking on Jay Powell to rescue him with a rate cut here? Well, that was at least the initial strategy. Jay Powell spoke on Friday about

And I think his approach is pretty sensible, right? You know, there's so many moving parts here that they cannot take a decision. That's basically what he's telling us. Which is fair. I think it's fair. So I think they'll cut in the first half of the year, but they'll wait towards the end of it, May, June, thereabout. March is not in play unless, you know, everything's completely fallen apart and

up until March, the end of March, but hopefully it's not, right? So no, the strategy is not to force Jay Powell to cut now. The strategy is to bring long-term bond yields lower. And they can do a lot about that via the treasury policy, via the budget balance, via the Doge project and all of that, instead of forcing him to do something about the policy rate. Because long-term bond yields matter a lot more. Remember that.

the average duration of a mortgage loan is way longer than the policy rate, if you know what I mean. So it's much more important whether 10 or 30-year bond deals are lower than whether Jay Powell cuts 25 basis points. Remember that when he did this 50 basis point cut back in the autumn, mortgage rates were through the roof after that cut.

because the economy was suddenly firing on all cylinders, the inflation scare was back and all of that. He wants to remove the inflation scare. Whether he'll succeed with that is a long and technical discussion. And I think we should spend maybe 10, 15 minutes on that today. Absolutely. And that was an excellent bridge to the next topic, Andreas, because

Let's start with tariffs as an inflation driver. The logical conclusion is that if you push in tariffs into imported goods, prices will rise. That's inflation. Is it that simple? Yes and no. Obviously, if you add an import tariff on everything, stuff will have to get more expensive. The question is, who swallows the bill?

Is it the exporting country? Is it the importing company? Or is it the end consumer? Those are kind of the three main agents to discuss here. So let's take a look at the empirical evidence from the first Trump era. We don't have that chart here. But my point is, if you look at the tariffs implemented on China, when China is faced with, say, 10% or 20% import tariffs,

they can do two things to circumvent them. They can either trade via a third country. They did that a lot during the first Trump era. So basically reroute stuff via LATAM or you name it, right? To avoid the tariffs. So that's one solution. That's not going to be as easy as this time around. Trump basically learned from the first experience. China will just reroute stuff if you don't,

ensure that, and that's basically part of the negotiations with China and sorry, with Mexico and Canada right now, they want Mexico and Canada to also put tariffs on China to avoid this. On top of that, China can, you know, they'll have to discuss internally, okay, if we do not lower our prices, we'll eventually lose our market share in the U.S.,

because of a higher price point that our internal competitors will not be faced with. And I think the ultimate end goal for Lutnick and Trump and those responsible for this terrorist policy is obviously to try and bring the production and manufacturing inside the terrorist zone again, so to speak. And they can only ensure that if China does not lower prices or if China is not able to reroute stuff.

So that's what they're trying to obtain now. And if they manage to secure that, then we'll get a spike in prices. That's ultimately pretty clear, at least for a temporary period until the local production is up to speed and all of that. So I think the yes and the no is the correct answer here.

So let me go through a few technical assumptions on this. And I have a chart on it because the import price index is obviously the one you need to watch now through March due to the implementation on tariffs, both on counterparts, but also on metal specific topics. We have the chart here. So this is the import price index. And my worst case assumption is that we'll see a price hike of 20%

on all Chinese goods imported to the US, two times 10%, right? On top of that, we have a 25% tariff added on Mexico and Canada, but with a truckload of exemptions currently. So it's a tariff on everything except everything basically right now. But some goods will be tariffed way less than 50%, way less.

So if you take those tariffs plus the steel and aluminum tariffs going live this week and then do a weighted average of all imported goods crossing the border to the US, you get to 5.5% in a month. That's a lot. But that assumes...

no whatsoever attempt to try and lower prices to keep market shares intact. It assumes no rerouting at all. It assumes zero demand effects. And I've seen so many economists do this exercise and call this a base case, which is absolute bonkers. It's nonsense. It's like measuring stuff in a vacuum, right? Of course,

A lot of trade will be rerouted. Of course, we'll see dynamic changes. You have existing stocks that are going to be filled in yet. Yes, all of that. So my base case is one of the two lower attempts of trying to measure it here. Probably closer to the best case of, say, 1%, 1.5% increases in import prices. And remember, this is the import price. So this is the price increase for the importer.

If you import a car, you're not going to pass on that exact price increase penny by penny to your customer day one. You're not going to do that because you have price lists, you have prices,

basically, quote unquote, promises that you've made to counterparts and so on and so forth. What we can gather from empirical relationships between import prices and consumer prices is that, say, between 15 and 20 percent will be passed on in the first month. And now we're talking 20, 30 basis points all of a sudden, which is, of course, bad.

but not a major catastrophe. So I'm just trying to tell you here that, sure, you can, I mean, it's pretty simple to just state, yes, prices are going to pick up, but you need to consider all of the dynamic effects you get out of it. And on top of this, which is maybe the most important thing to notice right now, every single importer on earth

They haven't been, they've not been living under a rock for the past three months, right? They've bought everything they could ahead of these deadlines. So their stocks are booming. That's what we can see from all of the surveys right now. We can also see it from stock data.

that the inventories are, you know, they've skyrocketed ahead of this. The trade balance is as negative as it's ever been through the first months of the year because of all of the imports happening before the trade deadlines, the tariff deadlines. So obviously we have a whole stock at old prices to use first. So I'm not super scared that we get an inflation spike right here.

That's what I'm trying to say. And I haven't even calculated the effect of it here because it's impossible. Take a look at some of the charts

that you can produce with the Truflation number. I'd like to show that now, Mikkel. Because Truflation, it's a pretty interesting concept. We have the chart right there. And it's basically like a big sample of prices that you get from Walmarts and those kind of retailers out there.

And it's off a cliff. It's the dark blue. It's the dark blue. So it's basically printing below 1.5% year over year. And the official inflation print is 3-ish, right? Between friends. So something is going on here. And

Those dynamic effects are completely neglected by the mainstream economists right now, in my opinion. And I'm rather of the view that we get the surprise in the other direction on inflation, which will wrong foot everyone. And I know this is extremely contrarian to say because it seems so super obvious when you put tariffs on everything.

Sure, the price should spike and it may spike eventually, but not right now. And I don't see any convincing signs that the price spike is here right now. It's not with us in the room. Very interesting. And look at the correlation to bond yields here. It's been a super strong indicator. If this indicator is right this time around, we'll get past the 4% hurdle on the way down again in bond yields.

which will be very stimulative into the second half of the year, into next year. So maybe, and I stress maybe, it's not all that bad what they're doing right now. And, you know, I think this is a very under-told story. It's under-reported in many ways. Yeah, and at the end of the day, the consumer has the same amount of money available. Yeah, at least for now. At least for now, yeah. So...

Very interesting address. Should we point on a few more topics on inflation or you want to... Yeah. Okay. So...

what does this mean if inflation is actually still heading lower uh if if true inflation is just barely right uh our indicators on inflation are not as soft as true inflation that we just stress that but the direction is pretty much the same um we can have a look at the dollar first i think that's basically been the macro play of of 2025 so far uh when you look at the dollar versus macro surprises versus inflation surprises etc uh we're talking about a crystal clear picture being bringing the dollar lower um and

Remember that global liquidity, global financial conditions, et cetera, they're very dependent on the dollar index. They're very dependent on dollar bond yields, et cetera. So when we get a weaker dollar and lower bond yields in tandem, it's something that will bring about optimism in a while. So I'm just trying to, you know,

I think of the next step here after the dollar weakens, after dollar bond yields come lower, I actually think it paves the way for some sort of pretty material rebound. And that's the light we have at the end of the tunnel right now, because I perfectly acknowledge that we need some light at the end of the tunnel. It's not pretty right now, but this may be what they're trying to obtain. Interesting. Let's grab a little question here from Sarah.

Presumably, they want short-term rates down this year to refinance the trillions of US debt that's due. What's more important for the public sector in that context, short-term or long-term rates? Right in between, I'd say, because if you take a look at the average...

outstanding debt of the public finance in the US or the US Treasury, we're talking somewhere in the belly of the curve. That's basically what they're targeting. And when I mean the belly, we're talking between five and eight years. That's the sweet spot. If they can get five to eight year bond yields down,

that's perfect um they have a lot of t bills right now if they can if they can invert the curve um which they're currently in the process of doing again so if the short-term bond yield is higher than the five-year point or the eight-year point they can roll that that further out and that's secure five-way deals of low bond yields which would be perfect um so i think the five to eight year um

Range is basically what they're targeting. And Scott Besant is aware of this. You know, he's a smart guy. I don't hold high hopes that Trump is super aware of this, but Besant is. And yeah, he's basically trying to orchestrate a very soft yield curve further out.

to roll the debt into five, eight-year structures on low bond yields. So it doesn't necessarily mean that we'll get plenty of rate cuts this year, but it means that we'll get lower medium-term bond yields in the meanwhile. Another question here from Luca. Two questions, one that keeps occurring here. Have you sold Mind Medicine? It's almost a weekly question by now. Yeah.

there was a bit of of uh confusion around that yes it is sold um i you know i i still i still love it uh the case basically um the mind medicine case is is obviously a case within alternative treatment medicine for uh depression and other disorders and you know it's it's a case that has suffered alongside the nasdaq case alongside the high beta case in general in the us

and we need some software inflation data we need some lower bond deals and all of that to get this case running again and then we need some focus on bobby kennedy and his agenda and right now everything else is stealing the show i just have to admit to that um i think this will be a tremendous case uh at some point during this trump batman because it is it is a strategic case for them but just not right now and we'll just you know it's a macro portfolio that we're running so we'll have to you know uh

orchestrate our returns after what's hot. And it's not hot right here, right now. It will turn hot. That's still my base case. But yeah, we'll have to wait and see. Yeah. And the other part of Luca's question here, I'll rephrase that slightly. He asks for EU alternatives to a lot of the suggestions currently in the RV portfolio. It seems to me a lot of American investors, private investors, are

really getting their eyes open for Europe right now. Sort of unboxing that for, oh, there's Brian Mattel, there are Vittonga sort of companies. So, if you look as a US investor. I'll actually be a little bit cautious in Europe right now, even though I've been banging the drum on the Europe case for the whole year with a lot of luck. Also, a couple of the trades that we have in the portfolio have done very, very well out of Europe. So,

Let me put it like this. Just before we went on air, basically through the morning here in Europe, we've only seen bad news arriving out of Germany. They're trying to orchestrate...

an alteration of their constitution related to their debt break. So they're trying to get away from their austerity measures and they're trying to invest in the military. They're trying to get a path towards investing billions and billions into Ukraine and all of that.

But they're struggling. And, you know, we'll see the negotiations ongoing this week. They'll have to solve it this week because they're using the old parliament to try and bring this through. But the Green Party is currently rejecting, which is a game changer because...

uh yeah they basically want fritisch maps to deliver some promises on wind turbines and the likes right uh some green stuff uh to accept this uh extra spending on on the military uh and he's been more in the camp of reopening the nukes um yeah yeah for electricity purposes um and um

Yeah, I'm not super optimistic on them getting it through this week. No, no, no. And that's, you know, Europe was through the roof on these plans and right now they don't have momentum. So it may be something that drags on for the entire spring. Yeah. Classic Germany, sorry. Yeah, there is still a case. We're getting a lot of questions on the Rheinmetall and the European defense industry. And I'm all about that. We've made a lot of money on that. The thing is,

we're not able to build anything in Europe. We've de-industrialized for a couple of decades now almost. And so all these European defense manufacturers, especially in Germany,

They need to build factories to build all this stuff. They need cheap energy. And they need energy for that. You need energy for that. A lot of these processes can run on electricity, but for metal forges, et cetera, you need gas as well. Where are we going to get that from? So there are still a lot of systemic issues here. So the good thing, and that's also why the Euro has gained a lot of momentum versus the dollar, is that we've seen much lower net gas prices in Europe alongside this Trump peace plan and all that. Yeah.

likely in anticipation of some sort of easing of sanctions against Russia. I've even heard rumors of Trump allegedly trying to push for some sort of reopening of Nord Stream 2 now.

god knows who uh quote unquote knew that one uh probably wasn't russia um that we put it like that uh at least some sort of investigation is still needed there um but it's still you know still an open question whether we'll get to trade nat gas to a larger extent with russia again this year i'm not speaking for and against from a moral perspective here i'm just trying to cynically analyze the situation and i think the most likely outcome is that europe ultimately

we'll have to do like this and buy some nat gas from Russia again. Yeah, so we need the Russian gas to build weapons to fight the Russians.

Yeah, I kind of am. Okay, one more question. That would probably give you an error in Excel. You did that calculator. Circular reference. Anyway, that's where we're at. Okay, one more question here from Ruth, and I think that's a popular one here. Hi, guys. What's your view on when we will see another leg up in the digital asset space? We have a very, very concrete chart on that. Yeah, exactly.

So here's the thing, you need a weaker dollar, you need lower bond yields to get that move going. And I had long discussions with both the RV community, within the RV community, with Raoul and with loads of people heavily involved from a portfolio perspective in the digital asset space.

around this strong dollar that we saw. We can just bring the chart up here. It's a great one. And we had a really strong dollar after Trump took office again due to tariffs, due to his America First policy and all of that. We have the dollar in reverse here in dark blue. So when it goes south in the chart, it means that the dollar strengthens and vice versa now that we're seeing the opposite, right?

And the light blue is the Bitcoin return. So there's a time lag between the two, but they're actually very correlated if you allow the dollar to sort of lead the way. A quarter, yeah. So a quarter later, you're starting to see something. And remember that the two weeks that we've just seen have basically let the dollar much lower. So we're talking, yeah,

10 weeks from now or something like that on typical correlations before you really start to see the momentum back. But on this chart, right, it doesn't really seem like we have a slide here. And in my opinion, Bitcoin trades really stable right now compared to Nasdaq. So maybe that's a clue. At least I'm, you know, I'm personally waiting a little bit, but my intention is to accumulate rather than the opposite from here.

And we have this dip that shows a little bit in the trade just recently. So I think the signs are starting to accumulate, but it's early days. So it's time to buy the dip here? Yeah, more or less. Yeah.

But what's the logic here, Andreas? Let's round off with that. Is this a matter of US investors looking at their dollar holdings and losing purchasing power and that? Yeah, I think there's a link between the purchasing power of the dollar and the Bitcoin, obviously. That's also, to some extent, the same case for gold, right? There's also a link between financial conditions and liquidity and how the dollar trades. And that was the big...

question mark around what was going on through the initial Trump trade phase, because the dollar increased and Bitcoin increased at the same time, which is pretty rare because of, you know, it was kind of the same trade in a sense. People anticipated Trump bringing the dollar in a stronger direction and Bitcoin in a stronger direction at the same time.

which is somewhat counterintuitive and it doesn't work that way over time. So we need a weaker dollar to get a stronger Bitcoin. And Trump and Besant is now trying to get a weaker dollar. And that's, for those of you who invested in Bitcoin, that's ultimately good news. And then we covered a lot of ground on that last week.

This reserve is a fucking joke. I mean, sorry. Bitcoin reserve. Yes. Come on. I mean, but I kind of, you know, having said that, I think it's lovely that the crypto market and the Bitcoin market will have to stand on its own feet. I think that's, you know, that's the preferable outcome because all of this, that the public sector buy all of it. No. No.

It wasn't the intention to begin with. I kind of see the case for Bitcoin. I see less of a case for ETH and the rest for this kind of reserve thinking because they're utility-based. They're not store value-based to the same extent as Bitcoin. So Bitcoin, there's maybe a case for this. For the rest, forget about it and look at the utility case instead.

That's all we have for you this week, Andreas, from Acro Mondays. Is it tomorrow you have the State of the Union? Yeah, if I don't puke, yes. We've probably been for like three or four times now. So if you're a pro-macro subscriber, you can look forward to that. If you're not, you should sign up for that because that's a much deeper dive. Could you put some words on what to expect tomorrow? Yeah, so I mean, I really think that we're...

approaching some mega interesting accumulation levels for a lot of assets. So we'll go through the entire macro landscape across China, Europe, Japan, the US to try and find single names, to try and find good expressions that can have a very strong risk reward, say over the next six months with this weaker dollar, lower bond yields, easier financial conditions. Where do you find the value to play that? That's basically what I'm looking at.

A whole lot to look forward to there. Thanks a lot for joining us this week, Andreas. Thank you. And thanks a lot, everyone, for tuning in. We'll be back next Monday. See you. Join over 7,000 attendees on June 18th to 19th at Super AI Singapore, Asia's largest AI event. East will meet West as industry leaders converge for two unparalleled days exploring the exponential AI age.

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