Okay, here's a summary of the provided "Markets Weekly" transcript, focusing on the key points and arguments presented:
**Overview:**
This "Markets Weekly" episode, recorded on March 15th, covers three main topics: recent market price action, key economic data (particularly inflation), and updates on the ongoing trade war. The speaker begins by referencing his previous market outlook from December 2023, highlighting the accuracy of his predictions for the S&P 500, gold prices, and 10-year Treasury yields.
**Price Action:**
The past week was described as volatile for equities, with significant swings but ultimately minimal week-over-week price changes. The speaker notes a positive surge on Friday, with the S&P 500 rising by 2%. He believes the market is finding support and stabilizing, but the direction heavily depends on trade war headlines. While predicting potential bounces in the short-term, the reduced volatility suggests less panic in the market.
Regarding the 10-year yield, it dipped to 4.2% before rebounding to 4.3%. The speaker reiterates his view that the market was initially underestimating the likelihood of Fed rate cuts, arguing that 4-6 cuts are more realistic than the previously priced-in one. Now, with the market pricing in about 3 cuts, he finds it more reasonable given geopolitical risks, tariff concerns, and softer economic data.
Gold experienced a surge to $3,000, the speaker is unsure of the specific catalyst but suggests possible drivers include monetary policy concerns, geopolitical uncertainty, and potential tariff-related demand. He also mentions that Central Banks could be diversifying, so he advises to watch gold closely.
**Economic Data:**
The discussion shifts to recent CPI and PPI data, with emphasis on inflation. The speaker notes that January's hot CPI print was likely a seasonal effect, supported by February's cooler CPI of 0.2% month-over-month. PPI was also cooler than expected. However, components feeding into the Fed's preferred PCE metric weren't as encouraging, with the Cleveland Fed's forecast suggesting a 2.6% year-over-year core PCE, slightly above the Fed's target and indicating stalled progress on inflation.
Inflation expectations were highlighted as "pretty crazy," with significant divergence based on political affiliation (Democrats expecting higher inflation than Republicans). While the Fed focuses on long-term inflation expectations, which remain relatively contained, the speaker acknowledges the public panic reflected in short-term expectations.
Consumer surveys reveal increased pessimism about the job market, particularly among higher-income, white-collar workers, potentially due to layoffs in big tech and public sector job cuts. Blue-collar workers have a more positive outlook. While jobless claims and NMP data haven't yet reflected significant job losses, the speaker suggests this may appear in coming months.
**Trade War:**
A last-minute deal averted a government shutdown, removing a potential risk and allowing quantitative tightening to continue longer.
President Trump imposed 25% tariffs on steel and aluminum imports, citing national security. The speaker notes limited opposition, even from Democrats aiming to regain support from manufacturing workers in the Rust Belt. The United Auto Workers union supports the tariffs. Canada is most impacted, while US steel and aluminum companies are benefiting.
In response, the EU imposed retaliatory tariffs on the US and Canada. Australia and Brazil chose negotiation over retaliation, similar to Mexican President Claudia Shinebaum's approach, which has been successful.
The speaker notes Canada's approach to escalating the trade war is a political move. With an election on the horizon, the Liberal Party has seen a boost in political prospects despite the damage to the Canadian economy, with Mark Carney hinting at canceling the F-35 purchase from the US.
Overall, the speaker believes steel and aluminum tariffs will persist. The larger tariffs on April 2nd remain a key event to watch. The speaker believes that countries choosing negotiation could minimize market and economic downsides.
**Conclusion:**
The speaker concludes by mentioning the upcoming FOMC week and promises to provide an update on its outcomes.