What do you expect in “Liberation Day”

Good morning. The stocks, especially technical stocks, were ugly yesterday, but they gathered in the afternoon. Biotechnology stocks, especially Moderna, Charles River Labs and other vaccine makers, were more difficult, after the official food vaccine and drug vaccine to resign During the weekend. Our correspondent email: [email protected] and [email protected].

Editing Day

Tomorrow is the “Liberation Day” of President Trump: At the moment, we were told, he will announce the essence of his trade policy, especially on mutual definitions. Rams of Wall Street Research has been washed on this topic in the DISTEDID incoming box, and although a lot of talk about uncertainty, a somewhat clear group of consensus expectations appear from it. There are four points from a wide agreement, but barely global (note that a lot of research was written before Trump’s suspension on the weekend that “all American commercial partners” will get the definitions):

• Trump’s tariff program will leave the average fees on commercial partners in the United States ranges between 10 and 20 percent, as most commentators put the number in the lower half of this range. There are a lot of plans that float around comparing these numbers with historical levels. This comes from David Seif in Nomura:

• An immediate or semi -medium tariff will be announced in the group of countries with the largest commercial imbalances with the United States (China, European Union, Mexico, Vietnam, Ireland, Germany, Taiwan, Japan, South Korea, Canada, India, Thailand, Italy, Switzerland and Malaysia). These will be imposed using some or other forms of executive concession.

• The sectoral tariffs, along with the tariff of cars, will be implemented to a later date, pending more study by the administration. But the sectoral definitions of semiconductors, pharmaceutical preparations, wood and copper are all expected to be eventually expected.

• Many people in Wall Street expect possible softening signals for the definitions of Mexico and Canada, and may come in the form of confirmation that the “compatible” goods under the USMCA trade agreement between the three countries will remain free of customs tariffs.

On the other hand, Wall Street does not know what to think about two basic points. It is still unclear, that is, the tariff that will be “stacked” on top of each other, and where the highest tariff will only be applied. And the severity of the non -carrier barriers (shares, licensing restrictions, other taxes, etc.), real or imaginaryEverything is unknown.

Regarding the implications of the market, the consensus is very clear as negative for stocks (will reduce profits) and positive for the dollar (“relief valve” of major changes in relative prices). Many of them also consider it positive for bond prices. Here is Michael Zizas, head of US Policy Research at Morgan Stanley, summarizes things yesterday:

The result that will be more useful for fixed income for stocks is the result in which investors receive a significant clarity on a significant tariff. This may seem to be an increase in the customs tariff that exceeds the customs tariff teams, to calculate foreign consumption taxes and non -carrier barriers, in addition to a clear indication that the tape is high to negotiate with commercial partners to alleviate new procedures. Here, according to our economic experts, there is a clear negative aspect of the growth expectations of the United States.

Is all this at a price already? Most analysts say, “No.” The decisive issue is that it does not seem to be just thinking of Trump, but at some point he will do something and continue to do so, and at this point the market will have to pricing it.

Trump loves uncertainty, because he gives him negotiation on influence by keeping his opponents out of balance and maintaining attention to himself. This will not change soon. If we get a decrease in uncertainty in politics on Wednesday, Distedged is expected to be temporarily proven.

The wealthy consumers

The rich are the American consumption engine. Mark Zandy, chief American economist, says, according to MOODY analyzes – with a significant increase a few years ago, that families at the top 10 percent of income distribution represent half of the spending on consumers last year, according to a significant increase a few years ago.

Their share of spending was steadily rising over the years, but it started significantly after the epidemic, due to the increase in stock values ​​and homes. (Expensive) homes and stocks are not proportional to the heads. This has led to the effect of a strong fortune: if people see (the value) of what they possess in the height of what they owe – in other words, wealth – they tend to be more aggressive.

If enlargement of assets increases the mutation of consumption after birth, the weakest markets cannot cause a decline? If it is rich in retreat, the recession may become a stagnation?

We have received some soft indicators that may reduce the wealthy of their spending. Consumer morale at the University of Michigan showed that it drowns between the highest third of the leaves of the leaves faster than the other soil:

The richest families are also exposed to the stock market – and therefore, the last correction. According to the Q4 data from the Federal Reserve, the 10 percent of families in wealth in the United States account for 87 percent of all owned shares. The highest 0.1 percent alone has 23 percent. A week ago, Donald Trump was elected in November, the highest 10 percent of the richest American families witnessed $ 2.7 trillion of their wealth in the market, compared to $ 656 billion down 90 percent. Yesterday, we are male The latest PCE data showed a rise in the personal savings rate and the expected consumption children. The most richer families can explain much of that.

But the effect should not be exaggerated. While the correction has knocked on color brokerage accounts, it destroyed a relatively small part of its total assets: 2.4 percent for 10 percent, and 3 percent for 0.1 percent. And that is several years after the returns of the fleeing stock market and the appreciation of the prices of homes. According to Samuel Thompses, the chief American economist in the macroeconomic economy in Pantheon still still has the highest of 20 percent of the liquid assets, compared to the previous slowdown and low profit (the graph of graves):

We have not seen points in the restaurant and hotels sectors, and they are two areas of consumption carried by the rich. Historically, the large market waterfalls have not always caused the highest income consumers to decline, according to the graves:

The highest highest in the highest income families continued to increase their spending in 2001 and 2002, despite (A) the sharp decrease in the total revenue of the S&P 500 from 12 percent and 22 percent, respectively, as well as recently in 2022 (-18 %).

The richest families are also flexible in prices, and they may be able to look through any inflation than the Trump tariff, as they did during the 2022 inflationary increase. It is also less likely to work in the sectors that can be affected more than the customs tariff: manufacturing, building homes and consumer electronics.

The retreat by wealthy consumers will be very worrying about the economy. This may happen if the market takes another big leg. But at the present time, the rich appearance of continuing spending.

((Reich)

revision

In yesterday’s message, we said that PCE CORE increased by 4 percent a month. This was a mistake – it was 0.4 per cent, which was still the highest monthly height since January 2024. We apologize.

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