Macro Monday: What Trump's Tariff War Means for Markets ft. Andreas Steno & Mikkel Rosenvold
36:13 Share

It's good to be here at the main Belochian event of this year.

You get to speak to the smartest people, people like you trying to figure this out, but also the people on stage. They're the experts. What more can you ask? It's a brilliant, brilliant event, and you'll come away with lots of new ideas and a better understanding of this incredible exponential world. So we get all of that all in one place. See you at Token 2049 in Dubai. ♪

Consensus Hong Kong 2025 is where the global crypto community converges to shape the next era of Web3. From February 18th through the 20th, Hong Kong becomes the meeting point for leaders across finance, technology and digital assets. This isn't just a conference. It's where deals are made, partnerships are forged and new opportunities emerge.

ConsenSys features exclusive networking lounges, expert-led sessions, and invaluable insights from top industry voices. Whether you're expanding your network, building your brand, or closing your next big deal, this is the event that moves markets. Visit coindesk.com forward slash ConsenSys dash HK to secure your spot and use Real Vision 15 for 15% off. Don't miss your chance to be part of the industry's defining moment.

Hello everyone, hello out there and welcome to another edition of Macro Mondays. My name is Mikko Osnall and I'm your host and with me as usual my partner in crime Andreas. Welcome to the show. Thank you very much Mikko. Another weekend, another Monday, another Trump scare but not as dramatic as the past two Mondays as it's been a little quieter in the office today Andreas. Yeah but you know it seems like a pattern now that you know late Friday European now is

we get some sort of new message on tariffs. We obviously got the one related to, is it called reciprocal tariffs on Friday? Hi, Raoul here.

Listen, I think we've got until 2030 before the economic singularity arrives. Now, it might not be the exact date, but it's around then. So we have about six years to figure out how to unfuck our future. I've put together a report to help you called Prepare for 2030. It's going to help you take the first steps in that journey to make sure you're secure past 2030. So just click on the link below and start your journey now.

And, you know, it scared me a little bit when I read those headlines initially. I'm now a lot more calm about them since...

You know, some of the big countries, at least worldwide, they have nothing to fear from such a tariff plan. While some emerging markets may suffer a lot, but we can get back to that. But maybe, Mikkel, we should discuss how to handle Donald Trump and his tariff plans. Because I'm almost tempted to give you a handshake like the Japanese PM did on Friday. Because I know right after these headlines...

Ishiba, I think that's his name, visited Trump and the Oval Office. And the takeaways are pretty clear, in my opinion. It seems like he managed to handle Donald Trump. And it's probably the first foreign leader managing to do so.

So, yeah, with one big exception, we can get back to that. A certain Benjamin Netanyahu. But yes, apparently, we're not quite sure what he promised Trump, but at least he got away from the meeting without a to-do list, it seems, which is what most leaders get out of Donald Trump these days. It seemed like he handled the potential tariffs quite calmly. All the talk about bringing down the U.S. trade deficit towards Japan, he took relatively calmly.

agreed to buy more liquid natural or liquefied natural gas from the US. It seems like he's building quite a rapport with Trump, which is more than you can say for most global leaders right now. So this might be a blueprint. Get in there, agree to most of the stuff he's saying and try to get out of there with a deal and focus on what's important. So absolutely. I still think Benjamin Netanyahu, having somehow managed Trump that he needs to invade Gaza and take over...

a creator of a country is a bigger accomplishment but we are seeing some people making headway potentially also Vladimir Putin that's or now mostly in the rumor mill we can touch a little bit on that later perhaps but very interesting

Andreas, before we get further, let's just remind everyone that this is a sneak peek into our analyses that we do at Real Vision. You have put out your weekly StenoSignals article. I think it's out today. Real Vision, you have to be a pro macro member to access that. We'll give a little bit of a sneak peek into the thinking, but to get all the juicy analysis, you'll have to sign up for that. And then you have to remember that even though we try to be very actionable, that we are data driven, etc.,

That's our trade recommendations. They might, as we always say, sometimes be... Sometimes maybe good, sometimes maybe shit. Exactly. Thank you for that, Peter. Always, always. Andreas, we have a new competitor in the macro space, in the macro analysis space, it seems. On X, even. And it's this guy. He might be the first Nazi macro pundit ever. Kanye, none other than Kanye. Please, for X, reprise.

Please don't stop this guy. You know, it's a tremendous source of entertainment throughout the weekend. So many good things. You know, it's obviously been...

Crazy to follow his tweeting activity. But this tweet was pretty interesting because I think he refers to the overnight reverse repo facility at the Federal Reserve. And I think it goes to show how we've managed to democratize liquidity analysis here at Real Vision when even Kanye is tweeting it.

The world's biggest rapper, perhaps, talking about the Forex repo. But on a serious note, Mikkel, the overnight reverse repo facility is close to the zero lower bound. And I think that is what Kanye refers to here, potentially at least. And it basically means that this source of liquidity from the Federal Reserve is close to being empty.

So from here on, they basically have to find a new liquidity trick up their sleeve to ensure that liquidity developments are benign in dollar markets. I think they will get some help from the US Treasury over the coming weeks because the US Treasury is close to exhausting all of their so-called temporary special measures after the debt ceiling took place during January.

Meaning that the so-called Treasury General Account, the amount of idle cash that they hold at the Federal Reserve, will have to be used as a funding source through the next, say, six to eight weeks. And we, or at least banks, will be on the receiving end of all of those dollars. So after that,

The Fed will simply have to find a way of adding liquidity to dollar markets to ensure an orderly market functioning. And that's a pretty bullish scenario. So bullish that even Kanye has figured it out. But apparently it's not good news for Ethereum. No. One thing he's absolutely not bullish on is this tweet I really like as well. Very, very direct analysis. Directly actionable. Fuck Ethereum, essentially. That's, yeah, it's out there. Yeah.

But again, on a serious note, if we look at, you know, this is kind of, to me, a good gauge of the sentiment around Ethereum. You have to say. Yeah, it's a pretty disheartening gauge. But if you look at the speculator data on Ethereum, we've seen a new record short in Ethereum over the past week. And

We don't need a lot of good news to wrong foot that entire speculative positioning against Ethereum now. So I'm not trying to make like a big fundamental case for Ethereum here, but we don't need a lot of like trigger events to see Ethereum breaking a lot higher from here, given how bad the sentiment is, given how bad

short the market is positioned relative to Ethereum. So let's see if we get a soft inflation report later this week, I think we're flying in for crypto space again. So you're saying that this is the absolute low point on sentiment on Ethereum. This marks the... That could very well be. I remember Paris Hilton giving an interview on CNBC when Bitcoin peaked during the last cycle, saying that she was involved. Maybe this is the reverse indicator of that. I don't know.

Great stuff, Andreas. Andreas, let's, in all seriousness, let's just dip our toes into your stainless signals. You wrote about the outlook for the business cycle in 2025. What can people find in that article? Well, I think if we cut through all of this noise around tariffs, around Kanye tweeting, et cetera, we actually find pretty promising signs beneath the hood. And

When you look at the production cycle, so basically physical stuff being produced in the economy, we're talking about improving order books from very low inventories. So it's a very benign scenario. And the rate cuts that we saw through 2024 will slowly but surely feed into the business cycle this year. Remember that these interest rate cuts, they work with a lag and

We saw bond deals coming a lot lower over the summer last year, and it will probably show up in the data in the US economy, say from springtime and onwards. So

I'm pretty certain that we will have a strong development in the economy, a strong credit creation, a strong liquidity development, setting all of this noise aside. And it is so tempting to train on these headlines from Donald Trump every time you see new tariffs being implemented, new countries being the center of attention for the trade frictions and all of that.

But the underlying business cycle is basically what you need to assess when you invest rather than these headlines. And this is a really, really good chart to explain why. Because if you look at the business cycle right now, I think the overwhelming conclusion is that the service sector is doing better than the manufacturing sector. So, you know, services around food, services around consulting, all of that. People businesses, they're doing well.

But we're starting to see some softness in that part of the economy. Fair enough. That's typically what happens with the time lag to all of the interest rate hikes and the wage growth that we've seen from 22 to 24, basically. But the good news is that the manufacturing side, which is basically the cyclical part of the economy, is starting to pick up. And the dark blue line here is the spread between manufacturing and services. So if it picks up, it means that manufacturing is gaining momentum relative to services.

And that's basically all you need to know as an investor, because that's telling for the future direction of the economy. It's not telling you about the past. And the future direction is pretty bullish still, especially if we pair this with rate cuts from the Fed. And as you can see, the spread between these two sectors is very highly correlated to returns in risk assets, in crypto, you name it. So I think it's too early to call

uh the peak here uh i basically cannot remember a bull market with a weaker sentiment than what we are faced with right now you know um everyone i talk to find the peak to be in um and i'm not sure you know given how solid uh a forward-looking indicator the manufacturing cycle is so are people overreacting or reading too much into the trump headline yeah and and

Simply not focusing enough on the actual economy underneath the hood. Just see this show, Michael. We spent 10 minutes discussing these tariffs from the get-go of the show every week. And ultimately, equities are up by the end of the week anyway. More or less. It's matched on Monday and then... I know that US equities have been sort of sideways to slightly down since December. But equities elsewhere around the globe are basically through the roof. German equities...

Chinese equities are doing really well, especially in the tech sector. It looks more like a 2021 scenario than anything to me.

Okay, Andreas. In a little while, we'll get to some of the big numbers coming out this week and a bit of a preview of that. Remember that no matter which platform you're on, you can ask live questions and we'll try and pick up as many of them as we can. Andreas, just to sum up this part of the show, and you could obviously read much more in your ProMacro article, how do you play this pro-cyclical moment? I'd like to show a few charts on ProMacro.

what a pro cyclical macro environment looks like. A good example of it is that we see a rising demand for stuff. And by stuff, I mean everything from food to energy to raw materials. And, and,

We are starting to see signs of a pickup in, for example, food inflation. And that's, to me, a clear example of a pickup in demand. And this is a good chart showing why we're starting to see the first signs of food inflation in the producer leg of the supply chain. At some point during this year, sorry, Donald Trump, you'll start to see this in Walmart as well.

And we're already starting to see egg prices going bananas. For some reason, egg prices are always early in the cycle. I'm not a farmer, so I have no clue why, but egg prices are really early in the cycle always. And I think this will spread to everything from soft commodities to hard commodities. Gold is still super big this week.

Copper is through the roof. You know, this is a sign of activity actually picking up out there, right? Not in the service economy, not in the data center economy, in the real deal. And that's basically how you describe a pickup in the real economy. And I think that's basically what you need to understand.

and take your investment decisions from that outset. It means that a lot of commodities are still cheap. I have an overview on the next page. And if you want to see our top picks, go to the pro macro section on Real Vision. But the most right hand column here shows the spread between the current commodity price development and where it should trade, given where the business cycle is heading.

Uh, and you know, the bigger the number in green, um, the more negative basically, uh, the better, uh, the bigger, the fair value gap. Uh, so, you know, everything from copper, um, to sink, whatever, um,

Looks like a buy. And this is not bad news. It basically means that the economy is starting to grow in very cyclical terms. It's no longer just a data center upswing. It's no longer just a service sector upswing. It's also a production upswing. Actual stuff being bought and sold, as they usually say. Interesting. So, Andreas, what type of equities could be interested in this if you're not into commodities? You know, financials. I think the banking sector is a good example of

A sector doing well when there's a pickup in the actual cycle. Technology actually does pretty well in such a scenario as well. And then materials. That sector fund is also really, really interesting given this. And then obviously mining. You know, we've seen gold through the roof

again today, but also through the last weeks, probably in anticipation of tariffs, right? We've seen physical gold being moved right, left and center to the US. So people are simply bringing their physical gold back to home in anticipation of gold being tariffed at some point. That's

a really, really clear sign to me that the margins will pick up for miners since the spread between the production price and the selling prices is now increasing again. So, you know, I'm almost perma against buying miners, but I think there's a decent window of opportunity right now. You mentioned financials, Andreas. I just want to show you this headline from Reuters, I think it is, that

the newly installed head of the US Consumer Financial Protection Bureau has instructed all activities to be suspended. So the entire agency is being shut down. It seems like the Trump government is trying to not only deregulate, but completely deregulate, I mean, burn all regulation to the ground on the financial sector. I don't know if I'm reading too much, but is that a trend? That should be positive. We're nesting the European Union, right?

the mothership of regulation basically. And even here, we're starting to talk about, uh, cutting red tape for banks, especially as a response to everything that's ongoing in the U S now. So I think this is a global trend. Um, financials have done really well in equity markets over the past month. Even European banks are starting to look pretty solid. Um,

Yeah, it feels weird to say so, but after being caught in the abyss for like 10 years in a row, we're starting to see some decent returns there. So this is the Wild West in a positive way. Credit growth, more loans, more

look at the consumer loan data from December, it's absolutely on a tier. And I think it's driven by expectations of Trump deregulating everything or maybe just abolishing everything, right? Just do business. Go ahead and do business. I couldn't care less, right? If we have a 2008 scenario in five years, he doesn't care. That's not his problem. Okay, Andreas, I'll just pick up a few questions before we get to look at the week ahead here. Yeah.

Ralph is basically summing up political risk is weighing down what should be a straight bull market. Yeah, I think that's quite right, Ralph. Very fair assessment here. So let's grab Bernardo asking because oil was also flagged with quite a big spread in our chart just before. Is there any reason why oil is so cheap at the moment? Is that a long-term trend? What do you see for oil?

So to me, that's mostly a supply story more than a demand story. The demand is picking up without a doubt in oil space. So we still have a lot of idle capacity out there. And currently, it seems like a competition to increase supply. And Trump is trying to increase supply from the US. He's urging oil.

Japan, India, you name it, to buy U.S. energy. Obviously, it means that other countries will have to buy non-U.S. energy by the end of the day. But anyway, there's a supply competition now.

including Saudi Arabia, the biggest supplier, right? Yes. Or at least the typical biggest supplier because they're currently like, they're struggling with their market share. And I don't think they'll accept that over time. No, no, no. And the only way to recover those market shares is obviously to produce more and so on. Because at the end of the day, they...

they have the lowest costs of pumping of the oil. So they have the advantage there, but it's got to come at a short-term cost to their budget, of course. So it is a big dilemma for them. I think that's absolutely the trend. I think that's why the chart we showed before, we can just bring it up again on commodities. I'm always a little bit hesitant about oil because it's not really a perfect market. There's so much...

so much what you call that tampering with both supply and demand for political reasons that it's tough to rely solely on that but yeah absolutely as I tweeted about yesterday as well

To me, geopolitical risk is fading very, very quickly now. We have a peace deal in Gaza. The Red Sea is theoretically open for business again, open for transport again. Talks are getting more and more serious about a peace deal in Ukraine.

The Iranians have been pushing for a new deal with the U.S. for months. Now even Trump is going in that direction. All the fears about an Israel-Iran war must now be silenced completely. We're heading towards a peace deal in Sudan, maybe. I think we are... I know things could happen next week. Things could blow up in my head, but we are looking at lower geopolitical risk, which should also push down oil prices, obviously. So, yeah.

Let's just focus a little bit on the dollar here. What do you think is the timeline on the dollar weakening, Christian, from Christian here? Okay, I'd like to put up a chart, Mikkel, on inflation, trueflation, because our friends over at Trueflation, they obviously run daily inflation data, as we do here on Real Vision. And the trueflation data is actually a strong outlier now. Yeah.

It's an even stronger signal than we get in our daily collection of price points. But as you can see, the inflation has basically cratered through January and February. So why is that? I think it's related to a couple of things because, you know, I just showed you that food prices are on the up. Also clear in the true inflation data, by the way. But we're talking about utility costs coming down. So basically everything from pipe gas to electricity and stuff like that.

on a year-over-year basis. We're talking about housing costs coming down. We do see some signs of shelter costs coming down in some of the big cities as well. And those two components are super important for the inflation basket. Remember that housing costs are basically 40% of the basket, right? And my expectations for Wednesday for the CPI report are

They're also pretty low. I mean, I think there's a decent chance that we can get a soft CPI report. That's exactly the kind of report you need to see for the dollar to start weakening on a trend basis. So far, it's been weakening clearly against the Japanese yen, but I think we'll see broader weakness in the dollar versus especially the Western peers after Wednesday. So I think the timeline is now more or less.

Against some of the emerging market currencies, I'm a little bit more in doubt, basically because of what Trump said on Friday. I don't think we have the chart, Michael, but I spent all weekend looking into the details from the World Bank on average tariffs applied to goods and services across the globe.

And this is a very, very long story to get through all of the tariffs data. But what I can say, and you can find all of the details in our report on Real Vision, is that a couple of the big emerging markets, India, Brazil, Argentina, not so much anymore after Millet started cutting tariffs, but some of those big emerging countries, they have much higher tariffs than what we typically have in the West.

And if they're faced with a tit-for-tat tariffs approach from Trump, it would be a catastrophe for the export out of emerging markets. But in Europe, we would be clapping because, you know, we've lost ground to Brazil, China, to India, etc.

Europe is in a sweet spot right now because in a tit-for-tat scenario, Europe doesn't apply big tariffs on the U.S. In some small niches, yes, but not on an average level. But to what extent can we deliver the same goods that they can from those countries? It will take some time, obviously, right? But we're talking about the rate of change, basically. Yeah.

Stuff moving back to Europe for economic reasons in case of reciprocal tariffs being implemented. So, you know, the bottom line of this approach laid forward by Trump on Friday is that we should actually expect tariffs to come down globally, in my opinion, which is a very contrarian take right now. But, you know, he's putting pressure on emerging markets,

And, you know, the Biden approach to this would be, yeah, they're emerging economies. We should probably allow them to tax us more than what we do the other way around because of relations, because of global alliances and all of that. Trump couldn't care less about that. He's a businessman. And if he implements a tit-for-tat approach against India, India will have to cut tariffs.

Absolutely. And I think that will be the response from India. You could even see the Eurozone politicians start talking about cutting tariffs on autos now. And I mean, maybe we'll end up with on average lower tariffs globally because of the pressure he applies to his counterparts. Because it's more important for people to sell stuff to the US than their ability to buy cheap items. Yes. Yes.

Very, very interesting take, Andreas. I don't think you hear that a lot out there. Just to sum up before we dive into a question or two more,

we have a whole article out every week we we publish an article called the week at a glance where we we repeat we preview the major numbers releases etc uh should we do the cpi numbers here's our expectation for the entire basket just to give you an overview of the or look into the level of detail here i don't know if you can even see that on the on the screen anyway uh so our headline expectation 0.25 slightly lower than the market consensus yes

And that is the important takeaway, especially for energy. It's low for shelter costs were probably lower than the market expectations. And then you will have some price declines in cars to look forward to on Wednesday. We obviously already seen them if you bought a car in January. But the overall vibe is a pretty soft report. And, you know, this is mostly good news. Bond yields will likely come down. The dollar will sell off.

and we'll probably get a positive response from risk markets if I'm right. So the only caveat when you lay out such a detailed forecast is that it's only a matter of how wrong you are, right? You will never be 100% accurate, but yeah.

Take a look at it and pray that I'm right. At least this is not Captain Hindsight. This is... No, no, no. We're talking about... You can measure it off. You can see the previews of the small businesses survey, the retail sales, etc. Speaking of car sales, Andreas, in January, is this the first January in how many years that you haven't bought a new car? I just came to think of that. That's true. It's usually a January thing for you. New year, new car. Yes. Thanks for reminding me of that. Yeah.

It actually makes me a little sad, but maybe it's a sign of something bigger.

That's why the prices are dropping. Not in the market anymore. Interesting, interesting. Okay, Andreas, let's just grab one or two final questions here. You mentioned that Euro and Chinese stocks are going up. Is that a result of recent liquidity injections in those geographies? Yeah, at least for China, there's some merit to that view. For Europe, less so. So I think the European bull case has been mostly a matter of

assessing the risk picture related to these tariffs. And as I said, currently with tariffs being implemented on China, the net winner of that is Europe because we've lost market shares. And I say we as a European, we've lost market shares to China since the pandemic. We've lost market shares to India. We've lost market shares to Mexico and Brazil. There's on the margin,

a rate of change moving in the direction of Europe due to these tariffs right now. Could obviously change if Trump changes his mind. But for now, Europe is in a sweet spot. And Europe is not particularly expensive if you look at it from a multiples perspective.

So to sum it up, Andreas, you're looking at the mining sector, you're looking at banks, you're looking at Europe. It's tough to find European mining, but I mean, European mining companies anyway. We don't do a lot of mining here. A little bit in Sweden, yeah. Yeah, that's not very much. European banks? Yeah, they look good. Oh, interesting. Yeah, feels odd to say so, but they look good. Any other final points or recommendations, Andreas?

No, I think you should look forward to this inflation report if I'm right, that it will be solved. If you look at CTA data, et cetera, it seems like a lot of people are still stuck with the view that we need interest rates to be higher for longer. I think the inflation report on Wednesday will alter that view on a trend basis, basically. So it's big news.

Very interesting. We will obviously keep track of that. Maybe on Monday, we should do a bit of a review to see how we've done on those, uh, those predictions. Sometimes maybe good. Sometimes maybe shit, obviously. Yeah. And then if, if I'm wrong about Wednesday, I'll obviously have a good story to tell on Monday on why that was. Then you'll have to buy a car. I think that sums it up. Okay. Great stuff. Uh, we covered both Kanye, inflation, small businesses, everything. Uh,

Remember to check out our research and our publications on Real Vision with the Pro Macro subscription. We have a couple of shows coming up. I have a great interview starting up a bit more geopolitical coverage. You have a State of the Union that was broadcast this week on Friday. So be sure to check all that out on Real Vision. And if nothing else, we'll see you next week. Yalla Habibi! It's good to be here at the main blockchain event of this year.

You get to speak to the smartest people, people like you trying to figure this out, but also the people on stage. They're the experts. What more can you ask? It's a brilliant, brilliant event, and you'll come away with lots of new ideas and a better understanding of this incredible exponential world. So we get all of that all in one place. See you at Token 2049 in Dubai.

Consensus Hong Kong 2025 is where the global crypto community converges to shape the next era of Web3. From February 18th through the 20th, Hong Kong becomes the meeting point for leaders across finance, technology, and digital assets. This isn't just a conference. It's where deals are made, partnerships are forged, and new opportunities emerge. Consensus features exclusive networking lounges, and a number of other

expert-led sessions, and invaluable insights from top industry voices. Whether you're expanding your network, building your brand, or closing your next big deal, this is the event that moves markets. Visit coindesk.com forward slash consensus dash hk to secure your spot and use Real Vision 15 for 15% off. Don't miss your chance to be part of the industry's defining moment.

If you like 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.