Image Source: Pixabay
The Nasdaq100 surged 3.7% this week to close at an all-time high. Powered by Apple 13.3% melt-up, the Bloomberg MAG7 Index surged 5.4% to a record high.
August 6 – New York Times (Luke Broadwater and Tripp Mickle): “President Trump and Tim Cook, Apple’s chief executive, announced… Apple would devote $100 billion to additional investment in the United States, the company’s latest move to buy more components from U.S. suppliers and avoid the president’s threat of tariffs on iPhones. The announcement, in the gold-adorned Oval Office, came after Mr. Cook presented Mr. Trump with a 24-karat gold gift and lavished him with praise. Mr. Cook highlighted the creation of Apple’s American Manufacturing Program, focused on bringing more of the company’s supply chain and advanced manufacturing to the United States. The president ‘asked us to think about what more we could commit to doing,’ Mr. Cook said…, ‘and Mr. President, we took that challenge very seriously.’”
Add Tim Cook’s $100 billion investment commitment to February’s $500 billion. At this pace, it could turn into real money. Last week’s fledgling risk aversion was reversed as fast as you can yell “cover your shorts” and “unwind your hedges.” High yield CDS dropped 13 bps, reversing just over half of last week’s 22 bps spike. Investment-grade CDS reversed three of last week’s four bps increase. The VIX’s 5.2 drop (to 15.2) essentially reversed the previous week’s jump.
August 4 – Axios (Jim VandeHei and Mike Allen): “AI and its blood and oxygen — chips, data, energy — are producing an economic super-stimulant strong enough to prop up the entire country. Wall Street and retail investors are enabling and encouraging more… more… more. More chips, more data centers, more energy, more investment. The big companies and big investors are the early winners. A wild cycle is unfolding. The biggest companies in history are spending a stunning amount of money to fuel the AI revolution, driving demand for more chips, more energy and more capital… The big (Nvidia, Microsoft, Apple, Alphabet/Google, Amazon and Meta) are getting bigger, and burrowing deeper into direct investment and ownership of the products feeding into their AI. They’re buying up land, building data centers, sucking up chips, investing in energy sources. Microsoft and Nvidia together are worth about $2.5 trillion more today than they were a year ago. Alphabet, Google, Amazon and Meta together will spend nearly $400 billion this year on capital expenditures, largely to build AI infrastructure…”
Even in normal times, I would struggle to turn short-term negative on the U.S. economy, not with financial conditions this loose and markets booming. But a historic AI arms race is Anything But Normal Times.
Seems we’ve been to this movie before. One year ago, markets were jolted by a disappointing July 2024 Non-Farm payrolls report. At 97k, job gains significantly missed the 140k survey forecast. Worse yet, June’s 136k gain was sharply reduced to only 66k. The unemployment rate rose two-tenths to a nearly three-year high of 4.3%. At 3.6%, Average Hourly Earnings were weaker-than-expected and down notably from June’s 3.9%. Two-year Treasury yields sank 27 bps on the news (sound familiar?). “Markets began Pricing in the Possibility of a 50-bps Rate Cut in September.” “Banks Including JPMorgan and Citi Revised Their Forecasts to include two supersized Fed rate cuts.”
Between April and July 2024, the Unemployment Rate rose 0.3 percentage points to 4.2%. The “Sahm Rule” was thrust into the Wall Street recession narrative, demanding immediate Fed rate cuts. The inverted Treasury curve was also supposedly signaling recession. An early-August Reuters headline: “US Recession Scare Fuels Searing Rally in Bonds, Yield Curve Flip in View.” All the talk of a major Fed policy error quieted after the economy created 868k jobs in 2024’s final four months.
One year later, the economy is deeper into “terminal phase excess”. The markets, financial system, and economy are today more vulnerable. April’s episode illuminated latent fragilities and the potential for deleveraging to wreak swift havoc.
Yet financial conditions have loosened further. The market backdrop is increasingly manic. Credit is more overheated these days. High yield CDS is currently 40 bps lower than a year ago, with yields almost 70 bps lower (6.99% vs. 7.68%). Leveraged loan prices are meaningfully higher.
August 5 – Bloomberg (Ethan M Steinberg): “A massive wall of debt coming due, an unpredictable US leader and falling yields have compelled corporate borrowers to sell debt this year at the fastest clip since the pandemic debt binge of 2020. The annual supply of fresh investment-grade bonds surpassed $1 trillion on Tuesday, a day earlier than it did last year.”
Complimenting booming investment-grade and junk bond markets, “private Credit” Bubble inflation has intensified. And I really doubt we can overstate ramifications for the historic AI arms race, teaming with an epic “private Credit” high-risk lending boom.
August 8 – Bloomberg (Carmen Arroyo and Olivia Fishlow): “The heavy hitters of private credit have been waiting for this moment for years. Major lenders, which often cater to companies with dented credit, talk endlessly about the opportunities in investment-grade debt and in financing the breakneck growth of artificial intelligence. They’ve done smaller deals, but this week they caught the biggest fish yet: a $29 billion financing package for Meta Platforms Inc.’s massive data center in Louisiana… ‘Private credit has been itching to get into this space,’ said John Medina, senior vice president on the global project and infrastructure finance team at Moody’s Ratings. ‘This deal is one of the first of its kind for private credit and if it is successful, we would expect to see more.’ The biggest technology companies are in an AI arms race now, and they need cash to win.”
August 8 – Bloomberg (Rachel Graf): “The recent mania in the US leveraged-loan market cooled somewhat this week, as launches slowed and two offerings were postponed. A record-tying three-week run of launches topping $50 billion ended with about $38 billion of transactions hitting the market since Monday…”
It’s worth noting that Money Market Fund Assets (MMFA) surged $76 billion last week to a record $7.153 TN. MMFA have ballooned $1.018 TN, or 16.6%, over the past year.
After last Friday’s 27 bps downdraft, two-year Treasury yields reversed eight bps higher this week to 3.76%. Sinking 18 bps last week, market pricing for the December policy rate inched four bps higher to 3.75% (58bps of rate reduction). Ten-year yields rose seven bps this week – after dropping 17 bps last week – to 4.28%.
Interestingly, a key market gauge of inflation expectations – the five-year “breakeven rate” – jumped five bps this week, reversing most of last week’s seven bps drop. The rise in the ISM Services Prices subindex didn’t help. At a stronger-than-expected 69.9, Prices rose about 2.5 points to the high back to October 2022. Bloomberg: “Trump Eases Way for Lower Rates as Stagflation Talk Picks Up.”
The administration’s determined, methodical, and far-reaching power grab this week turned its sights on U.S. finance. President Trump will nominate the head of his Council of Economic Advisers, Stephen Miran, to serve out Fed Governor Adriana Kugler’s term. Retaining flexibility, it’s designated a “temporary” position until Kugler’s term ends at the end of January.
August 8 – Wall Street Journal (Nick Timiraos): “Stephen Miran… would add a voice inside the central bank that is explicitly critical of the conventional wisdom around how tariffs might affect inflation and economic growth. Many Fed officials are worried that tariffs will weaken the economy while raising prices, creating a difficult trade-off between cutting rates to support the economy or holding them steady to contain inflation. Miran says this is backward: that the economy will benefit from tariffs with no noticeable impact on prices, allowing the Fed to resume rate cuts… Beyond policy disagreements, though, Miran has questioned the Fed’s institutional legitimacy itself. He has accused central bank officials who frame their decisions as apolitical of being politically motivated, and lambasted Fed policymakers for what he calls ‘tariff derangement syndrome.’ In a paper last year, he argued that all of the Fed’s top officials should be subject to at-will dismissal by the White House… What began as technical disagreements about monetary-policy transmission evolved into sweeping charges about democratic accountability. Last fall, he railed against the Fed’s decision to begin lowering interest rates from a two-decade high, saying that Fed officials were unserious about bringing inflation down to their 2% goal. ‘I can’t think of anything more ‘Deep State’ and corrosive of our democracy than democratically unremovable officials at the Federal Reserve tacitly accepting permanently higher inflation in spite of Congress’ delegated instructions for ‘stable prices,’’ he wrote… Now, with Trump pushing for lower rates, Miran has said he doesn’t think inflation is likely to be a problem.”
From Forbes’ Shawn Tully: “As my sources told me, Miran is a rarity, a highly trained economist who knows all the jargon, has absorbed the peer studies, brings intellectual heft, and makes a logical-sounding case for Trump’s stunningly contrarian game plan. ‘To say the least, it’s a relatively small pool of PhD economists who are economic nationalists. That’s a blinding reality. But Steve is one,’ says someone outside the administration who knows him.”
President Trump: “He has been with me from the beginning of my Second Term, and his expertise in the World of Economics is unparalleled — He will do an outstanding job.”
Like many, I had not heard of Stephen Miran before his “A User’s Guide to Restructuring the Global Trading System” and his so-called “Mar-a-Lago Accord” took Wall Street by storm. I’m not in the least impressed with his analytical framework. Future historians will surely be less polite.
That said, Miran is the perfect administration choice. It’s hard to believe he will say or do (vote) anything at odds with the President’s wishes. He has quickly risen the ranks to top White House advisor and soon Fed governor only because of loyalty to President Trump. This week, the administration’s assault on Fed independence became tangible. Rising roughshod over the prestigious universities and law firms, the President has set his sights on the big banks and corporate CEOs not toeing the line – not to mention his political enemies.
August 7 – Wall Street Journal (Dylan Tokar and Miriam Gottfried): “A pair of executive orders President Trump is expected to sign Thursday shows how he is beginning to reshape the world of banking and high finance—some in ways Wall Street likes, and others it fears. One order would make it easier for everyday Americans to invest their retirement savings in assets that lie outside public markets, such as private equity, cryptocurrency and private real estate. The move would fulfill a long-sought goal of Wall Street hedge funds and private-equity firms, which for years have wanted to tap in to the giant pool of money in 401(k) and other defined-contribution plans. It is a different story for big banks. A second order directs regulators to look into whether banks discriminate on political or religious grounds, and take disciplinary action against those found to have done so.”
August 6 – New York Times (Rob Copeland): “President Trump said… he was a victim of discrimination by two of the nation’s largest banks, and suggested that his personal experience was fueling his animus with Wall Street. Mr. Trump… said both JPMorgan… and Bank of America refused to accept more than $1 billion in deposits from the Trump Organization after his first term. He said he had made personal appeals to the chief executives of both banks but had been rejected… The president’s commentary… carries significant weight on Wall Street because his administration has been preparing a crackdown, in the form of an executive order and other proposed regulatory changes, on so-called debanking practices. Many right-leaning organizations have claimed that the financial system has locked them out because of their political positions.”
August 7 – Bloomberg (Jennifer A Dlouhy and Allison McNeely): “President Donald Trump will sign an executive order Thursday that aims to allow private equity, real estate, cryptocurrency and other alternative assets in 401(k)s, a major victory for industries looking to tap some of the roughly $12.5 trillion held in those retirement accounts. The order will direct the Labor Department to reevaluate guidance around alternative asset investments in retirement plans subject to the Employee Retirement Income Security Act of 1974… The department will also be tasked with clarifying the government’s position on the fiduciary responsibilities associated with offering asset allocation funds that include alternative holdings. Trump will also direct Labor Secretary Lori Chavez-DeRemer to work with counterparts at the Treasury Department, Securities and Exchange Commission, and other federal regulators to determine whether rule changes should be made to assist in the effort.”
August 7 – Axios (Ben Berkowitz): “President Trump… demanded Intel CEO Lip-Bu Tan resign, following concerns about his reported ties to Chinese companies. Tan is in the middle of trying to turn Intel around at a time when the government is pushing to bolster the U.S. chip industry. It was only six months ago that the Trump administration was reportedly trying to broker a deal with Taiwan’s TSMC to run Intel’s factories. ‘The CEO of INTEL is highly CONFLICTED and must resign, immediately. There is no other solution to this problem,’ Trump posted on Truth Social.”
It could be the proverbial “frog in the pot.” Or perhaps it’s just that speculative markets are so enamored with the scope of Trump’s pro-growth, pro-Bubble agenda that they’re willing to cut the administration a lot of slack. A whole lot. And so long as markets accommodate, the President’s great power play will power ahead without bounds. The bond bears were run over last week. Ample good reasons to get off the pavement and regroup. Miran on the FOMC, ongoing tariff madness, and booming markets should have the attention of the bond vigilantes.
August 7 – Axios (Ben Berkowitz): “As of Thursday, sweeping new global tariffs are in place. Sort of. Probably. With exceptions? Anyone who thought President Trump’s firm deadline to impose tariffs was the final word on the trade war is about to learn a very hard lesson. Unlike in decades past, trade negotiations are not a process that has a start and a finish, the goal being an agreement that will stand the test of time. Rather, they are an ongoing process, in which the U.S. can implement tariffs on any country, at any time, for any reason — regardless of any preexisting treaties or handshake deals.”
August 7 – Financial Times (Harry Dempsey and David Keohane): “Japan’s lead trade negotiator has said that the US has promised to fix an ‘extremely regrettable’ oversight to ensure that the country’s biggest companies do not face tariffs in excess of those agreed between the sides last month. Ryosei Akazawa said that the US had promised to avoid ‘stacking’ the tariffs — which would add the 15% levy agreed between Washington and Tokyo on top of existing charges — and refunding companies that had already been overcharged… ‘It is extremely regrettable that… an order inconsistent with the US-Japan agreement was issued and put into effect,’ Akazawa said following talks in Washington… with US commerce secretary Howard Lutnick and Treasury secretary Scott Bessent.”
August 3 – Bloomberg (Sakura Murakami and Yoshiaki Nohara): “The trade deal reached last month between the US and Japan was ‘win-win’ for both countries, but implementing the terms of the pact may be a bigger challenge than reaching the deal, Japanese Prime Minister Shigeru Ishiba said. ‘Some say that carrying the trade deal out is harder than agreeing on it. I humbly seek your continued support on this,’ Ishiba said… in response to questions in parliament. At the same session of parliament, Japan’s chief trade negotiator Ryosei Akazawa acknowledged criticism over the lack of having anything in writing. ‘It’s my understanding having something on paper would be helpful,’ Akazawa said, adding that there’s also nothing in writing related to Washington’s deals with the EU and South Korea.”
One would think having trade deals in writing might indeed be helpful. Certainly not my only “what the…” moment this week.
August 5 – Wall Street Journal (Nick Timiraos and Brian Schwartz): “In the chess game over bending the Federal Reserve to his will and sidelining Chair Jerome Powell, a significant piece just fell into President Trump’s hands. Fed governor Adriana Kugler said unexpectedly last week that she will leave the central bank this Friday, about six months before her term was set to end. That gives the president the chance to install his own pick on the rate-setting committee earlier than he had expected, adding pressure on Powell with a new ally who can push for interest-rate cuts… Among the people Trump has talked to for their opinion: Fox News anchor Sean Hannity, Newsmax Chief Executive Chris Ruddy and former Trump White House chief-strategist-turned-talk-show-host Steve Bannon…”
Consulting Hannity, Ruddy and Bannon on Fed appointments?
August 7 – Bloomberg (Saleha Mohsin): “Federal Reserve Governor Christopher Waller is emerging as a top candidate to serve as the central bank’s chair among President Donald Trump’s advisers as they look for a replacement for Jerome Powell… Trump advisers are impressed with Waller’s willingness to move on policy based on forecasting, rather than current data, and his deep knowledge of the Fed system as a whole, the people said. Waller has met with the president’s team about the role, but has yet to meet with Trump himself… Kevin Warsh, a former Fed official, and Kevin Hassett, currently Trump’s National Economic Council director, also remain in contention for the job…”
I’ll be surprised if Waller is the next Fed chair. He’s not MAGA enough. Thursday’s signal that Waller is the leading candidate seemed timed to ease the shock of a Fed governor Miran. With market angst a no-show, there was a new narrative by Friday (James Bullard and Marc Sumerlin added to the Fed Chair list). Markets might not give a hoot, but I’m waiting for the announcement of the new head of the BLS.
August 6 – Bloomberg (Molly Smith and Skylar Woodhouse): “Steve Bannon, a senior adviser to President Donald Trump in his first term and an influential voice in conservative circles, is pushing for EJ Antoni to lead the Bureau of Labor Statistics. ‘EJ Antoni as the new head of Bureau of Labor Statistics — that’s what we’re pushing,’ Bannon said… ‘He’s the guy that almost single-handedly took it down by going through their numbers.’ Antoni, chief economist at the conservative Heritage Foundation, came on Bannon’s podcast Friday shortly after a BLS report showed weak job growth in July and substantial downward revisions to the prior two months. Bannon asked Antoni if there was a ‘MAGA Republican’ in charge of BLS. Antoni responded, ‘No, unfortunately.’”
August 4 – Axios (Neil Irwin): “This is what the alarmists — the people who have worried that President Trump may seek to undermine the collection of economic data — feared. The president’s abrupt firing of the Bureau of Labor Statistics commissioner… makes clear that any federal data collector who delivers unwelcome news could lose their job in an instant. Economists of all stripes fear a chilling impact. The removal ‘presents risks to the conduct of monetary policy, to financial stability, and to the economic outlook,’ wrote JPMorgan chief U.S. economist Michael Feroli… ‘These revisions reflect the commitment of statistical agencies to accuracy, transparency, and methodological rigor—not failure or bias,’ leaders of the American Economic Association said…”
For the Week:
The S&P500 gained 2.4% (up 8.6% y-t-d), and the Dow added 1.3% (up 3.8%). The Utilities increased 0.5% (up 13.8%). The Banks recovered 1.1% (up 10.8%), and the Broker/Dealers rallied 1.5% (up 29.1%). The Transports advanced 1.6% (down 3.5%). The S&P 400 Midcaps increased 0.6% (up 0.1%), and the small cap Russell 2000 jumped 2.4% (down 0.5%). The Nasdaq100 surged 3.7% (up 12.4%). The Semiconductors jumped 2.7% (up 14.0%). The Biotechs were little changed (down 0.9%). With bullion rising $34, the HUI gold index rallied 10.1% (up 71.6%).
Three-month Treasury bill rates ended the week at 4.1375%. Two-year government yields reversed eight bps higher to 3.76% (down 48bps y-t-d). Five-year T-note yields rose seven bps to 3.83% (down 55bps). Ten-year Treasury yields gained seven bps to 4.28% (down 29bps). Long bond yields increased three bps to 4.85% (up 7bps). Benchmark Fannie Mae MBS yields added a basis point to 5.47% (down 38bps).
Italian 10-year yields dipped three bps to 3.48% (down 4bps y-t-d). Greek 10-year yields declined two bps to 3.33% (up 11bps). Spain’s 10-year yields slipped a basis point to 3.26% (up 20bps). German bund yields added one basis point to 2.69% (up 32bps). French yields were unchanged at 3.35% (up 15bps). The French to German 10-year bond spread narrowed one to 66 bps. U.K. 10-year gilt yields rose seven bps to 4.60% (up 3bps). U.K.’s FTSE equities index added 0.3% (up 11.3% y-t-d).
Japan’s Nikkei 225 Equities Index jumped 2.5% (up 4.8% y-t-d). Japanese 10-year “JGB” yields fell seven bps to 1.49% (up 39bps y-t-d). France’s CAC40 gained 2.6% (up 4.9%). The German DAX equities index jumped 3.1% (up 21.4%). Spain’s IBEX 35 equities index surged 4.9% (up 27.9%). Italy’s FTSE MIB index jumped 4.2% (up 21.8%). EM equities were mostly higher. Brazil’s Bovespa index rallied 2.6% (up 13.0%), and Mexico’s Bolsa index gained 2.1% (up 17.3%). South Korea’s Kospi rallied 2.9% (up 33.8%). India’s Sensex equities index dipped 0.9% (up 1.7%). China’s Shanghai Exchange Index gained 2.1% (up 8.5%). Turkey’s Borsa Istanbul National 100 index added 2.1% (up 11.6%).
Federal Reserve Credit declined $3.8 billion last week to $6.593 TN. Fed Credit was down $2.297 TN from the June 22, 2022, peak. Over the past 308 weeks, Fed Credit expanded $2.866 TN, or 77%. Fed Credit inflated $3.782 TN, or 135%, over the past 665 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt were unchanged last week at $3.228 TN. “Custody holdings” were down $84.9 billion y-o-y, or 2.6%.
Total money market fund assets jumped $76.2 billion to a record $7.153 TN. Money funds were up $1.018 TN, or 16.6%, y-o-y.
Total Commercial Paper dropped $28.3 billion to $1.398 TN. CP has expanded $310 billion y-t-d and $146 billion, or 11.6%, y-o-y.
Freddie Mac 30-year fixed mortgage rates dropped nine bps to a four-month low 6.63% (down 16bps y-o-y). Fifteen-year rates fell 10 bps to 5.75% (down 12bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down five bps to 6.81% (down 28bps).
Currency Watch:
For the week, the U.S. Dollar Index declined 1.0% to 98.18 (down 9.5% y-t-d). For the week on the upside, the South African rand increased 2.1%, the Brazilian real 2.0%, the Mexican peso 1.5%, the British pound 1.3%, the Swedish krona 0.8%, the Australian dollar 0.7%, the New Zealand dollar 0.7%, the euro 0.5%, the Singapore dollar 0.3%, the Canadian dollar 0.2%, and the South Korean won 0.1%. On the downside, the Swiss franc declined 0.5%, the Norwegian krone 0.5%, and the Japanese yen 0.2%. The Chinese (onshore) renminbi increased 0.18% versus the dollar (up 1.66% y-t-d).
Commodities Watch:
August 7 – Bloomberg (Yihui Xie): “People’s Bank of China increased its gold reserve in July, marking nine straight months of purchases that are helping it diversify its holdings away from US dollars. Gold held by the central bank increased by 60,000 troy ounces to 73.96 million troy ounces last month… This brings the total tally of purchases since November — when the current wave of buying started — to around 36 tons.”
August 5 – Bloomberg (Yihui Xie): “Bullion held in warehouses linked to the Shanghai Futures Exchange has jumped to an all-time high, another sign of resilient demand for gold investments in China. More than 36 tons of gold bars have been registered for delivery against futures contracts, a quantity that has almost doubled over the past month. The build-up in stockpiles reflects a surge in arbitrage activity triggered by heavy demand for futures, which are trading at a large premium to the physical metal.”
August 5 – Bloomberg (Sybilla Gross, Jack Ryan, and Yihui Xie): “A years-long supply crunch in platinum has come to a head, with banks scrambling for dwindling stocks in London as buyers in China and the US hoover up much of the available metal. The market tightness has made platinum one of the best-performing commodities this year and fueled sky-high borrowing costs for the precious metal. Tariff fears have funneled large volumes to US warehouses, while Chinese imports continue to exceed estimated domestic consumption.”
The Bloomberg Commodities Index increased 0.2% (up 2.1% y-t-d). Spot Gold rose 1.0% to $3,398 (up 29.5%). Silver rallied 3.5% to $38.3444 (up 32.7%). WTI crude dropped $3.45, or 5.1%, to $63.88 (down 11%). Gasoline declined 1.5% (up 3%), and Natural Gas fell 3.0% to $2.99 (down 17%). Copper increased 0.8% (up 11%). Wheat slipped 0.4% (down 7%), and Corn fell 1.7% (down 17%). Bitcoin recovered $2,400, or 2.1%, to $116,400 (up 24.2%).
Market Instability Watch:
August 5 – Bloomberg (Michael Mackenzie): “The $2 trillion market for securities linked to US inflation data could be the first area of Treasuries to crack if the Bureau of Labor Statistics is politicized, according to bond investors. After President Donald Trump fired BLS chief Erika McEntarfer…, investors have fretted that the move could erode trust in government data, which has a major effect on asset prices. That link is perhaps most acute in Treasury inflation-protected securities, where the face value of a bond is adjusted based on the consumer price index, which is calculated by the BLS… ‘If there is politicization of the BLS, and somehow the data is not credible it poses an enormous risk over time to the Tips market,’ said Amar Reganti, fixed income strategist at Hartford Funds.”
August 8 – Bloomberg (James Hirai): “The US Treasury curve could steepen from its widest level in four years if President Donald Trump succeeds in making a key appointment to the Federal Reserve, according to strategists at JPMorgan… The spread between US five- and 30-year yields widened on Thursday after Trump chose Council of Economic Advisers Chairman Stephen Miran to serve as a Fed governor… That followed earlier reports that Governor Christopher Waller was favored to replace Jerome Powell as chair. ‘Miran has consistently argued that the Trump administration’s trade, immigration and deregulation policies are all disinflationary,’ JPMorgan analysts… wrote… ‘To the extent that this supports a more dovish Fed policy, it supports the steepening witnessed this afternoon.’”
Global Credit and Financial Bubble Watch:
August 2 – Financial Times (David Keohane and Leo Lewis): “The farmers’ bank known to global markets as one of Japan’s most aggressive investors will be more cautious and correct its ‘imbalances’ after it lost $12bn following a big bet on US Treasury bonds, its new chief executive said. Norinchukin, a co-operative lender that manages the savings of Japan’s farmers and fishermen, was until recently a voracious buyer of US government debt and other global assets, searching for yield… Taro Kitabayashi, who took over as chief executive in April, told the Financial Times that Norinchukin had taken positions that were too risky. ‘We need to rebuild our earning power… we took on more interest rate risk than we should have,’ he said… ‘So going forward, we intend to take a much more cautious stance.’”
August 8 – Bloomberg (Ying Luthra): “No issuers are considering US investment-grade debt offerings Friday… There’s been $40.4 billion of bonds sold since Monday, $10 billion more than the upper end of dealers’ estimates. The boon came as all-in funding costs plunged in the wake of last Friday’s jobs report… With yields still enticing, syndicate desks expect the higher gear to continue next week with $40 billion to $45 billion of projected high-grade issuance before the typical seasonal lull in the latter half of August.”
August 8 – Bloomberg (Gowri Gurumurthy): “US junk bonds are headed for the biggest weekly gain since early July on bets that the Federal Reserve will cut rates in the next meeting. Yields have tumbled 13 bps this week to a five-week low of 6.98%, and spreads tightened by 15 bps. That backdrop, along with strong corporate earnings, has fueled risk appetite and a supply boom in the high-yield market. About 14 deals have priced for more than $11b this week to make it the busiest since January, continuing the supply surge seen in June and July…”
August 5 – Financial Times (Eric Platt): “Apollo Global Management’s assets under management hit a high of $840bn… The… company drew in $61bn of fresh capital in the second quarter, two-thirds of which came from its asset management arm as large institutional investors and wealthy individuals sought to capitalise on market volatility… A large portion of these inflows came through so-called funding agreements, in which Apollo’s insurance subsidiary Athene raises capital from Federal Home Loan Banks in the US. Apollo… disclosed it had raised $11.7bn through the arrangement in the second quarter… The funding agreements ultimately must be repaid. But Apollo believes its investment team can earn more on those borrowings than they cost.”
August 5 – Wall Street Journal (Imani Moise): “Credit scores are supposed to start incorporating ‘buy now, pay later’ loans this fall. The plans may already be hitting a speed bump. Klarna, one of the biggest providers of the popular loans, said it wouldn’t share data about the bulk of its loans with credit bureaus until it gets assurances that its customers won’t be unfairly penalized for using its payment options. BNPL provider Afterpay has also said it plans to withhold data until it has proof its customers won’t be harmed.”
August 6 – Bloomberg (Kari Soo Lindberg, Claire Jiao, Olivia Poh, and Ditas B Lopez): “Maria Hazel Regalado, a 48-year-old mother of four in the Philippines, needed a computer last year so she could work from home. Regalado, who helps manage rental properties in Australia, didn’t have the cash or a credit card. A friend suggested she get a ‘buy now, pay later’ (BNPL) loan from Billease, an online lender… Lenders worldwide last year made $334 billion in BNPL loans, five times their value from five years before…”
Trump Administration Watch:
August 3 – New York Times (Peter Baker): “An old rule in Washington holds that you are entitled to your own opinions but you are not entitled to your own facts. President Trump seems determined to prove that wrong. Don’t like an intelligence report that contradicts your view? Go after the analysts. Don’t like cost estimates for your tax plan? Invent your own. Don’t like a predecessor’s climate policies? Scrub government websites of underlying data. Don’t like a museum exhibit that cites your impeachments? Delete any mention of them. Mr. Trump’s war on facts reached new heights on Friday when he angrily fired the Labor Department official in charge of compiling statistics on employment… Mr. Trump declared that her numbers were ‘phony’.”
August 3 – Wall Street Journal (Brian Schwartz): “A chief White House economic adviser said… President Trump wants his allies placed in the Bureau of Labor Statistics after the agency published a surprisingly dismal jobs report Friday and the president later fired its commissioner. Kevin Hassett… said on NBC that the firing of BLS commissioner Erika McEntarfer is part of Trump’s plan to make further changes to the agency. ‘The president wants his own people there, so that when we see the jobs numbers, they are more transparent and more reliable,’ Hassett said.”
August 5 – Axios (Ben Berkowitz): “President Trump… repeated his claims that government jobs data was rigged, insisting — without evidence — the statistics were manipulated to make him look bad. The more the president says the economy’s most crucial data point isn’t believable, the more investors might question their investments. ‘The numbers were rigged. The numbers were rigged. Biden wasn’t doing well, he was doing poorly,’ Trump told CNBC… ‘I think when somebody says the commissioner is not involved, I don’t want to get into any arguments with anybody, why should I? She’s a very nice woman, but when they say that nobody was involved, that it wasn’t political, give me a break.’”
August 5 – CNBC (Jeff Cox): “President Donald Trump told CNBC… he has narrowed the field of potential future Federal Reserve chairs to four candidates, a list that does not include Treasury Secretary Scott Bessent. While the president did not disclose who is in contention, he revealed that Bessent… has taken himself out of contention. ‘Well, I love Scott, but he wants to stay where he is,’ Trump said… ‘I asked him just last night, ‘Is this something you want?’ [Bessent said], ’Nope, I want to stay where I am. He actually said, ‘I want to work with you.’ It’s such an honor. I said, ‘That’s very nice. I appreciate that.’”
August 6 – Financial Times (Claire Jones, James Politi, Steff Chávez and Kate Duguid): “Donald Trump has said Kevin Hassett and Kevin Warsh are now the front-runners in the race to succeed Federal Reserve chair Jay Powell when his term leading the world’s most powerful central bank ends next May. ‘We’ve started the interviewing process, we have some great candidates, it’s probably down to three,’ the president said… When asked by a reporter whether Hassett and Warsh were the top contenders, Trump said: ‘The two Kevins are absolutely… they’re both very good.’”
August 7 – Wall Street Journal (Dylan Tokar and Miriam Gottfried): “President Trump signed a pair of executive orders… intended to reshape the world of banking and high finance—some in ways Wall Street likes, and others it feared. One order seeks to make it easier for everyday Americans to invest their retirement savings in assets that lie outside public markets, such as private equity, cryptocurrency and private real estate. The move fulfills a long-sought goal of Wall Street hedge funds and private-equity firms, which for years have wanted to tap in to the giant pool of money in 401(k) and other defined-contribution plans.”
August 5 – Axios (Jeffrey Cane): “President Trump is planning an executive order that would punish banks if they are believed to be discriminating against political conservatives. The president has previously targeted law firms and media companies, but with banks — one of the most heavily regulated industries — the administration has a number of levers it can pull to apply pressure. Appearing on CNBC…, Trump seemed to give a nod to a Wall Street Journal report that the White House is preparing an executive order directing regulators to penalize any bank found to have dropped a client on political grounds. The president accused JPMorgan Chase and Bank of America of discrimination by refusing to take his personal business.”
August 5 – Associated Press (David McHugh): “U.S. President Donald Trump is pushing China and India to stop buying oil from Russia and helping fund the Kremlin’s war against Ukraine. Trump is raising the issue as he seeks to press Russian President Vladimir Putin to agree to a ceasefire. But cheap Russian oil benefits refiners in those countries as well as meeting their needs for energy, and they’re not showing any inclination to halt the practice. China, India and Turkey are the biggest recipients of oil that used to go to the European Union.”
August 5 – Bloomberg (Skylar Woodhouse): “US President Donald Trump said he was ‘getting very close to a deal’ with China to extend the trade truce that saw the two countries agree to reduce tit-for-tat tariff hikes and ease export restrictions on rare earth magnets and certain technologies. ‘It’s not imperative, but I think we’re going to make a good deal,’ Trump said…, adding that the US was ‘getting along with China very well.’ Still, Trump downplayed the notion that he was eager for a meeting with Chinese President Xi Jinping… ‘I’ll end up having a meeting before the end of the year, most likely, if we make a deal… If we don’t make a deal, I’m not going to have a meeting.’”
August 8 – Wall Street Journal (Chip Cutter and Amrith Ramkumar): “In dealing with America’s biggest companies, the commander in chief has no qualms about acting as the micromanager in chief. President Trump took his penchant for telling corporate bosses how to run their companies to another level Thursday by publicly calling on Intel’s chief executive to resign. The move wasn’t out of character: Trump has told Detroit carmakers not to raise prices and demanded Walmart ‘eat the tariffs.’ He has pressured the Washington Commanders football team to change its name and wants Coca-Cola to use cane sugar instead of corn syrup. All of that intervention is creating a risk for business leaders who thought they had largely figured out the Trump playbook. Public flattery and splashy U.S. investment announcements were supposed to placate the president and keep companies out of his Truth Social posts. Instead, the Republican is weighing in on business decisions in unprecedented ways, in industries from pharmaceuticals to banking and manufacturing.”
August 6 – Bloomberg (Molly Smith and Skylar Woodhouse): “Steve Bannon, a senior adviser to President Donald Trump in his first term and an influential voice in conservative circles, is pushing for EJ Antoni to lead the Bureau of Labor Statistics. ‘EJ Antoni as the new head of Bureau of Labor Statistics — that’s what we’re pushing,’ Bannon said… ‘He’s the guy that almost single-handedly took it down by going through their numbers.’ Antoni, chief economist at the conservative Heritage Foundation, came on Bannon’s podcast Friday… Bannon asked Antoni if there was a ‘MAGA Republican’ in charge of BLS. Antoni responded, ‘No, unfortunately.’”
August 7 – Bloomberg (Chris Anstey): “Former Treasury Secretary Lawrence Summers warned that President Donald Trump’s policies risk putting the US on a similar path to that of postwar Argentina, which descended from being a relatively advanced developed nation into an economic laggard. ‘Argentina went completely off track because of decisions made in a few years by an elected… leader who pursued autocracy rather than venerating democracy,’ Summers said… ‘And that should be a cautionary tale for everyone in the business community and everyone involved in our political process.’ The late Juan Perón founded a populist movement in 1946 at a time when Argentina was grouped by some observers with the likes of Canada, Australia and New Zealand as a sophisticated economy with abundant natural resources. Peronism championed import substitution and high tariffs in an effort to stoke Argentina’s domestic industry. Trade protectionism was ‘the key policy’ leading to its economic downfall, according to a 2023 assessment published by the think tank OMFIF.”
China Trade War Watch:
August 4 – Wall Street Journal (Jon Emont, Heather Somerville and Alistair MacDonald): “China is limiting the flow of critical minerals to Western defense manufacturers, delaying production and forcing companies to scour the world for stockpiles of the minerals needed to make everything from bullets to jet fighters… China supplies around 90% of the world’s rare earths and dominates the production of many other critical minerals. As a result, one drone-parts manufacturer that supplies the U.S. military was forced to delay orders by up to two months while it searched for a non-Chinese source of magnets, which are assembled from rare earths. Certain materials needed by the defense industry now go for five or more times what was typical before China’s recent mineral restrictions…”
August 6 – Bloomberg: “President Donald Trump said he could punish China with additional tariffs over its purchases of Russian oil, though one of his top advisers played down the likelihood. Trump floated that possibility… after doubling tariffs on Indian goods for buying Russian energy. Responding to a reporter’s question on penalizing China for the same reason, he said that ‘may happen.’ ‘I mean I don’t know. I can’t tell you yet. But I can — we did it with — we did it with India. We’re doing it probably with a couple of others. One of them could be China,’ Trump said…”
August 3 – Bloomberg: “US Trade Representative Jamieson Greer sounded a cautiously optimistic note on discussions with China on rare earth flows… Greer said the key industrial components were a focus of negotiations in Stockholm last week that Beijing said led to an extension of their tariff truce. Without going into detail, he said the US secured commitments about their supply… ‘We’re focused on making sure that magnets from China to the United States and the adjacent supply chain can flow as freely as it did before the control,’ Greer said… ‘And I would say we’re about halfway there.’”
August 3 – Reuters (Ana Mano): “China has approved 183 new Brazilian coffee companies to export products to the Chinese market, according to… the Chinese embassy in Brazil… The measure, a boon to local exporters after the United States government’s announcement of steep tariffs on Brazilian coffee and other products, took effect on July 30… The U.S.’s 50% tariff on some Brazilian products will begin on August 6.”
Trade War Watch:
August 5 – Reuters (Arpan Varghese and Shashwat Chauhan): “Companies across the corporate spectrum revealed more pain from the cost of U.S. President Donald Trump’s tariff war, with bellwethers Caterpillar, Marriott and others… noting weaker demand and higher prices. All told, global companies that have reported earnings so far this quarter are looking at a hit of around $15 billion to profits in 2025… A majority of these come from industrial, manufacturing and automotive sectors, while financial and tech sectors are less affected… ‘I think we’re just getting started,’ said Steve Sosnick, chief market analyst at Interactive Brokers… ‘The tariffs are still in their infancy, especially with major trading partners like Canada, China and India still in flux.’”
August 6 – Wall Street Journal (Amrith Ramkumar, Natalie Andrews and Rolfe Winkler): “President Trump said he would impose roughly 100% tariffs on all chips coming into the U.S. but exempt tech companies that have promised to manufacture domestically, a big win for Apple and other electronics firms worried about new trade challenges. Trump’s announcement… came at an event trumpeting a new $100 billion investment pledge from Apple… The new exemptions are a win for Apple Chief Executive Tim Cook, who has warned about the impact from tariffs on China and India… Many industry executives had been bracing for tariffs on all chip-related products that would snarl supply chains for everything from cars to appliances.”
August 6 – New York Times (Ana Ionova): “When President Trump imposed eye-watering tariffs on Brazil to help Jair Bolsonaro, a political ally, Latin America’s largest nation kept a cool head and bet on old-school diplomacy. But on Monday night, that approach was imperiled when the Brazilian Supreme Court justice overseeing Mr. Bolsonaro’s case, Alexandre de Moraes, ordered his house arrest and barred him from using a cellphone. The United States quickly condemned Justice Moraes’s decision.”
August 6 – Associated Press (Josh Boak, Rajesh Roy and Fatima Hussein): “President Donald Trump signed an executive order Wednesday to place an additional 25% tariff on India for its purchases of Russian oil, bringing the combined tariffs imposed by the United States on its ally to 50%. The tariffs would go into effect 21 days after the signing of the order… Trump’s moves could scramble the economic trajectory of India, which until recently was seen as an alternative to China by American companies looking to relocate their manufacturing. China also buys oil from Russia, but it was not included in the order signed by the Republican president.”
August 6 – Reuters (Manoj Kumar, Trevor Hunnicutt and Aftab Ahmed): “After five rounds of trade negotiations, Indian officials were so confident of securing a favourable deal with the United States that they even signalled to the media that tariffs could be capped at 15%. Indian officials expected U.S. President Donald Trump to announce the deal himself weeks before the August 1 deadline. The announcement never came. New Delhi is now left with the surprise imposition of a 25% tariff on Indian goods from Friday, along with unspecified penalties over oil imports from Russia… Interviews with four Indian government officials and two U.S. government officials revealed previously undisclosed details of the proposed deal and an exclusive account of how negotiations collapsed… The officials on both sides said a mix of political misjudgment, missed signals and bitterness broke down the deal between the world’s biggest and fifth-largest economies, whose bilateral trade is worth over $190 billion.”
Constitution Watch:
August 8 – Bloomberg (Liam Knox and Maxwell Adler): “The Trump administration is seeking more than $1 billion from the University of California at Los Angeles in exchange for releasing $584 million in federal research funding that the US froze last week… UC President James Milliken wrote… on Friday that system officials were reviewing the offer. The university said this week it’s entered talks with government officials to restore the grants. ‘As a public university, we are stewards of taxpayer resources and a payment of this scale would completely devastate our country’s greatest public university system,’ Millken wrote…”
August 8 – Bloomberg (Liam Knox and Hadriana Lowenkron): “The Trump administration threatened to assume ownership of hundreds of millions of dollars worth of patents from Harvard University, accusing the Ivy League college of failing to comply with the law on federal research grants. In a letter to Harvard President Alan Garber…, Secretary of Commerce Howard Lutnick said the university is failing its obligations to US taxpayers, paving the way for a process that could result in the government seizing its patents under the Bayh-Dole Act. Harvard has until Sept. 5 to prove it’s complying with the requirements, including whether it showed a preference for US manufacturing, or risk forfeiting its patents…”
U.S./Russia/China/Europe/Iran Watch:
August 8 – Bloomberg: “China said its imports of Russian oil are justified, pushing back against US threats of new tariffs… ‘It is legitimate and lawful for China to conduct normal economic, trade and energy cooperation with all countries around the world, including Russia,’ the Chinese Foreign Ministry said… ‘We will continue to adopt reasonable energy security measures in accordance with our national interests.’”
August 5 – Wall Street Journal (Shan Li): “India is digging in its heels and resisting pressure from the U.S. to curb purchases of Russian oil… Last week, Trump said he would place a 25% tariff on Indian imports to the U.S. in retaliation for India’s large-scale purchases of cheap Russian oil… India has nonetheless refused to back down and has suggested that it intends to continue to buy Russian oil. Political experts said that Indian Prime Minister Narendra Modi is calculating that Trump will decide that ties between the two countries are ultimately too critical to jeopardize in a trade spat.”
August 6 – New York Times (Anupreeta Das): “President Trump has staked enormous political capital on being the one to end the war in Ukraine… In perhaps his biggest gamble yet to achieve that goal, he pledged… to punish India with tariffs of 50% for buying Russian oil. At stake is the relationship between the United States and an increasingly important strategic partner in Asia. India, the world’s most populous democracy, and the United States, its most powerful one, have an unusual relationship. They are friendly but not close, brought together by mutual interests and shared values, especially in recent decades.”
August 4 – Washington Post (Robyn Dixon): “The Kremlin warned… against ‘nuclear rhetoric’ after President Donald Trump repositioned two nuclear submarines because of what he called ‘foolish and inflammatory statements’ by former Russian president Dmitry Medvedev. Medvedev’s rambling comments… included veiled threats referencing Moscow’s ‘Dead Hand’ capability of carrying out a nuclear strike on the United States even if Russia’s leaders were attacked and unable to issue the order. ‘Russia is very cautious about nuclear nonproliferation matters, and we believe everyone should be very careful about nuclear rhetoric,’ Kremlin spokesman Dmitry Peskov said…”
August 5 – Associated Press: “Russia has declared that it no longer considers itself bound by a self-imposed moratorium on the deployment of nuclear-capable intermediate range missiles, a warning that potentially sets the stage for a new arms race as tensions between Moscow and Washington rise again over Ukraine.”
New World Order Watch:
August 7 – Bloomberg (Sudhi Ranjan Sen and Daniel Carvalho): “Indian Prime Minister Narendra Modi talked trade with his Brazilian counterpart and is expected to head to China for the first time in seven years in August, against the backdrop of worsening ties with the US. Brazil’s President Luiz Inacio Lula da Silva and Modi discussed the imposition of unilateral tariffs against their nations and reiterated plans to strengthen trade ties… Although it didn’t mention Donald Trump by name, Lula’s government noted that ‘Brazil and India are, to date, the two countries most affected’ by the wave of levies the US leader has unleashed.”
August 3 – Associated Press (Didi Tang): “U.S. and Chinese officials may be able to settle many of their differences to reach a trade deal and avert punishing tariffs, but they remain far apart on one issue: the U.S. demand that China stop purchasing oil from Iran and Russia. ‘China will always ensure its energy supply in ways that serve our national interests,’ China’s Foreign Ministry posted… following two days of trade negotiations… ‘Coercion and pressuring will not achieve anything. China will firmly defend its sovereignty, security and development interests,’ the ministry said.”
Canada Friend and Ally Watch:
August 8 – Bloomberg (Randy Thanthong-Knight): “The Canadian economy lost the most jobs since January 2022, and excluding the pandemic, it’s the largest drop in seven years. Employment fell by 40,800 positions in July, driven by decreases in full-time work, while the jobless rate held firm at 6.9%… The number of job losses surpassed even the most pessimistic projection in a Bloomberg survey of economists.”
Ukraine Watch:
August 8 – Washington Post (Jonathan Edwards, Siobhán O’Grady, John Hudson and Catherine Belton): “President Donald Trump and Russian President Vladimir Putin will meet next week in the United States as Trump pushes for a peace agreement that could require Ukraine to make major territorial concessions. The two leaders will meet Aug. 15 in Alaska, Trump and a Putin aide said, to try to forge a truce and end the war in Ukraine that Russia started 3½ years ago by invading the country… Earlier in the afternoon, Trump told reporters the terms of a peace agreement may require Ukraine to cede territory to Russia, a concession that would be difficult to accept for the country and its European supporters.”
August 3 – Financial Times (Polina Ivanova and Fabrice Deprez): “A Ukrainian drone hit a major oil depot in the southern Russian city of Sochi… triggering a large fire, as Kyiv steps up its long-range drone strikes in response to Moscow’s escalating attacks. Ukrainian President Volodymyr Zelenskyy said… he was ‘grateful for our long-range operations on Russian territory’. He said he had been briefed by Ukrainian security chief Vasyl Malyuk on the strikes. ‘Each of them is tangible for the enemy, and our operations will continue,’ Zelenskyy added.”
Budget Watch:
August 5 – Bloomberg (Alexandra Harris): “The US government plans to borrow $100 billion in a single Treasury debt sale this week, an unprecedented figure that showcases both the magnitude of its borrowing needs and its ability to attract investors. The Treasury said… it will auction $100 billion of four-week bills on Thursday, a record for the maturity and an increase of $5 billion from the previous week.”
August 3 – New York Times (Andrew Duehren): “President Trump’s extensive tariffs have already started to generate a significant amount of money for the federal government… As part of his quest to reorder the global trading system, Mr. Trump has imposed steep tariffs on America’s trading partners, with the bulk of those set to go into effect on Aug. 7. Even before the latest tariffs kick in, revenue from taxes collected on imported goods has grown dramatically so far this year. Customs duties, along with some excise taxes, generated $152 billion through July, roughly double the $78 billion netted over the same time period last fiscal year…”
AI Bubble Watch:
August 5 – Bloomberg (Saritha Rai and Seth Fiegerman): “It’s been almost three years since the US kicked off the artificial intelligence boom, and most of the world is still struggling to catch up. Only one country is close to matching the US in AI development: China. Chinese firms such as DeepSeek, Alibaba Group Holding Ltd. and Moonshot have released AI models that approach the capabilities of leading systems from US companies, spurred on by a government that has made AI leadership a national priority. To that end, it’s rolling out a package of generous state support and a national network of interlinked data processing hubs… To stay ahead, the Trump administration put out an AI Action Plan in July calling for cutting red tape to build more AI data centers and tap into enough electricity to power them. The US will do ‘whatever it takes to lead the world in artificial intelligence,’ President Donald Trump said…”
August 5 – Financial Times (George Hammond): “OpenAI is in talks with investors about a share sale that would value the company at $500bn and vault it past Elon Musk’s SpaceX to become the world’s most valuable private technology group. The ChatGPT maker is in the process of raising its last round of financing, a $40bn investment led by SoftBank that priced OpenAI at $300bn. But it is already discussing a valuation of almost double that with investors including Thrive Capital… That would mean OpenAI would outstrip SpaceX, recently valued at $400bn.”
August 1 – Wall Street Journal (Berber Jin and Keach Hagey): “As Mark Zuckerberg sought to play catch-up in the generative AI race, he reached out a few months ago to OpenAI’s former chief technology officer, Mira Murati, and offered to buy her fledgling startup, Thinking Machines Lab. When she said no, the Meta chief executive responded by launching a full-scale raid. In the following weeks he approached more than a dozen of Murati’s roughly 50 employees to sound them out about jumping ship. His chief target: Andrew Tulloch, a leading researcher and co-founder at the startup. To peel him off, Zuckerberg dangled a billion-dollar package that could, with top bonuses and extraordinary stock performance, have been worth as much as $1.5 billion over at least six years, according to people familiar… Tulloch said no. None of his colleagues left either.”
August 8 – Bloomberg (Carmen Arroyo, Laura Benitez, and Kurt Wagner): “Meta Platforms Inc. has selected Pacific Investment Management Co. and Blue Owl Capital Inc. to lead a $29 billion financing for its data center expansion in rural Louisiana as the race for artificial intelligence infrastructure heats up… Pimco is expected to lead a $26 billion debt portion of the financing, while Blue Owl is providing $3 billion of equity… The debt portion is likely to be issued in the form of investment-grade bonds backed by the data center’s assets…”
August 2 – Wall Street Journal (Greg Ip): “In the past two weeks one big tech company after another reported blowout earnings amid a wholesale embrace of artificial intelligence. Look a little closer, and a more unsettling side to the AI boom emerges. All the spending on chips, data centers and other AI infrastructure is draining American corporations of cash. This underscores the hidden risks from the AI boom. No one doubts its potential to raise growth and productivity in the long run. But financing that boom is straining the companies and capital markets. Since the first quarter of 2023, investment in information processing equipment has expanded 23%, after inflation, while total gross domestic product has expanded just 6%.”
Bubble and Mania Watch:
August 3 – Wall Street Journal (Andy Kessler): “The initial public offering was filed at $14. Everyone wanted shares, so Morgan Stanley set the deal price at $28. As trading started, the stock popped to $74, ending the day at $58. Tech star Figma? The latest SPAC? No, it was 30 years ago this week, Aug. 9, 1995. The Journal’s Molly Baker nailed it: ‘It took General Dynamics Corp. 43 years to become a corporation worth today’s $2.7 billion in the stock market. It took Netscape Communications Corp. about a minute.’ Remember, Netscape was a money-losing company with only $16.6 million in sales in its previous six months. Worth $2.7 billion! That’s the equivalent of Nvidia shares going up 11 cents today. We’ve come a long way, baby.”
August 6 – Bloomberg (Jess Menton): “Stock bulls have another reason to worry that the blistering rally in American equities may be about to cool. The Bloomberg Intelligence Market Pulse Index pushed to a ‘manic’ reading last month… The measure combines six metrics like market breadth, volatility and leverage to deliver a reading on investor sentiment. When it gets into overheated territory, returns tend to weaken in the following three months. The Pulse index’s rise comes after the S&P 500 rallied almost 30% from its April low… Surveys of investor sentiment indicate bullishness is growing toward alarming levels among Americans.”
August 3 – Bloomberg (Alexandra Semenova): “Investors across Wall Street eagerly piled into US stocks in July, sending the S&P 500 Index to 10 all-time highs in a month, but a notable group was heading in the opposite direction: corporate executives. Insiders at just 151 S&P 500 companies bought their own stocks last month, the fewest since at least 2018… And while July’s selling by corporate insiders slowed from June’s pace, purchases dropped even more, pushing the ratio of buying-to-selling to the lowest level in a year, the data shows.”
August 4 – Reuters (Emma-Victoria Farr and Amy-Jo Crowley): “Global dealmaking has reached $2.6 trillion, the highest for the first seven months of the year since the 2021 pandemic-era peak, as a quest for growth in corporate boardrooms and the impact of a surge in AI activity has overcome the uncertainty caused by U.S. tariffs. The number of transactions to August 1 is 16% lower than the same time last year, but their value is 28% higher, according to Dealogic…”
Inflation Watch:
August 7 – Reuters (Michael S. Derby): “Americans’ longer-term inflation outlook deteriorated in July even as households boosted their views on the current and future state of their respective financial situations, according to… the New York Federal Reserve. In its latest Survey of Consumer Expectations, the regional Fed bank said the expected level of inflation five years from now stood at 2.9% in July, rising from 2.6% in the prior month and the highest reading since March. Meanwhile, expected inflation a year from now rose to 3.1% from 3% in June, while three-year-ahead expected inflation held steady at 3%.”
August 4 – Axios (Alex Fitzpatrick): “Electricity costs are rising nationwide — and could get even higher for some amid the explosion in data centers powering AI and more… The nationwide average retail residential price for 1 kilowatt-hour of electricity rose from 16.41 cents to 17.47 cents between May 2024 and May 2025, per the… the U.S. Energy Information Administration, a gain of about 6.5%. Some states saw much larger increases, such as Maine (+36.3%), Connecticut (+18.4%) and Utah (+15.2%). Just five states saw a decrease…”
August 5 – CNBC (Karen Gilchrist): “U.S. buyers of Swiss products, from luxury watches and skincare to artisan chocolates, could soon face sharp price rises if negotiators are unable to strike a deal to avert 39% tariffs… The announcement last week that Switzerland faces one of the highest U.S. tariff rates in the world stunned many politicians, analysts and businesses, who had thought the country was close to negotiating a deal similar to those of the European Union and U.K., which got baseline rates of 15% and 10% respectively.”
August 3 – Wall Street Journal (Katherine Hamilton and Natasha Khan): “Americans are back on the hunt for a good deal. Consumer spending stagnated in the first half of this year…, and the CEOs of Chipotle Mexican Grill, Kroger and Procter & Gamble, among others, are telling investors that their customers are more strapped—or appear to feel that way. ‘There’s a lot of consumer anxiety,’ said Dirk Van de Put, chief executive of Mondelez International… After spending lavishly through the postpandemic years on everything from home improvement to travel, U.S. consumers find themselves in a summer of economic uncertainty. Beef prices are the highest on record. Daily latte habits now face as much as an additional 50% tariff on coffee. Ford Motor… said the Trump administration’s flurry of trade deals have heaped a punishing level of duties on the automaker.”
August 4 – Associated Press (Cora Lewis and Linley Sanders): “The vast majority of U.S. adults are at least somewhat stressed about the cost of groceries, a new poll finds, as prices continue to rise and concerns about the impact of President Donald Trump’s tariffs remain widespread. About half of all Americans say the cost of groceries is a ‘major’ source of stress in their life right now, while 33% say it’s a ‘minor’ source of stress, according to the poll from The Associated Press-NORC Center for Public Affairs Research. Only 14% say it’s not a source of stress, underscoring the pervasive anxiety most Americans continue to feel about the cost of everyday essentials.”
Federal Reserve Watch:
August 6 – Bloomberg (Catarina Saraiva): “Three Federal Reserve policymakers voiced concerns about the US labor market… with remarks that pointed to a potential interest-rate cut in September. Federal Reserve Bank of San Francisco President Mary Daly said policymakers will probably need to adjust interest rates in ‘coming months’ to prevent a further deterioration in hiring. ‘The labor market has softened. And I would see additional slowing as unwelcome,’ Daly said… ‘All this means that we will likely need to adjust policy in the coming months.’ That followed comments from Fed Governor Lisa Cook… on the July jobs report… The revisions, she said, were ‘somewhat typical of turning points’ in the economy. Neel Kashkari, president of the Minneapolis Fed, also expressed worry… over the slowdown showing up in multiple data points.”
August 7 – Bloomberg (Jonnelle Marte): “Federal Reserve Bank of Atlanta President Raphael Bostic said he still views one interest-rate cut as likely this year, and reiterated there are reasons to be skeptical that the inflationary effects from tariffs will be temporary. ‘This question about whether tariffs are a one-time thing, or whether they’re going to be more persistent in their effects and might even cause structural changes, I think is perhaps the most important question that we have today,’ Bostic said… The Atlanta Fed chief said there are reasons to be ‘somewhat skeptical’ that the tariffs being rolled out today fit the textbook example of tariffs leading to a one-time, temporary price bump.”
U.S. Economic Bubble Watch:
August 5 – Reuters (Michael S. Derby): “Total household debt levels rose during the second quarter as a growing number of student loan borrowers and some newer home borrowers faced rising credit challenges. The Federal Reserve Bank of New York said… overall borrowing during the second quarter increased $185 billion, or 1%, from the first quarter to $18.39 trillion. Housing-related credit, which makes up the bulk of borrowing in the U.S. economy, ticked up $131 billion to $12.94 trillion. The report noted that the overall move of different types of debt into some type of delinquency was ‘elevated’ during the second quarter, with 4.4% of overall borrowing hitting some level of delinquency, a very slight rise from what was seen in the first quarter.”
August 2 – Axios (Courtenay Brown): “America is showing new signs of stagflation — inflation running hotter, the job market suffering new weakness, and economists warning both are at risk of getting worse in the months ahead. The word ‘stagflation’ revives miserable memories of the 1970s, when Americans faced a dreadful combination of higher prices and few job opportunities… Predictions of weaker growth and more persistent inflation — the ‘stag’ and the ‘flation’ — looked farfetched, until now. ‘The bottom line is that the risk of stagflation has risen meaningfully,’ Olu Sonola, an economist at Fitch Ratings, wrote… ‘Inflation is drifting further from target, private sector economic growth has slowed materially, and the labor market has just sounded a warning bell.’”
August 5 – CNBC (Jessica Dickler): “Credit card balances are ticking higher in 2025, according to… the Federal Reserve Bank of New York. Balances rose by $27 billion in the second quarter to a collective $1.21 trillion — in line with last year’s all-time high. The total is up 2.3% from the previous quarter. At the same time, ‘we are still seeing elevated delinquency rates for credit cards,’ the New York Fed researchers found, with 6.93% of balances transitioning to delinquency over the last year.”
August 5 – Reuters (Dan Burns): “U.S. services sector activity unexpectedly flatlined in July with little change in orders and a further weakening in employment even as input costs climbed by the most in nearly three years… The Institute for Supply Management (ISM) said… its nonmanufacturing purchasing managers index (PMI) slipped to 50.1 last month from 50.8 in June… The ISM survey’s new orders measure declined to 50.3 last month from 51.3 in June, with export orders falling back into contraction for the fourth time in five months. The survey’s measure of services employment fell to 46.4, the lowest level since March, from 47.2 in June… Price pressures, meanwhile, continue to mount. The survey’s prices paid index rose to 69.9, the highest level since October 2022, from 67.5 in June.”
August 7 – Axios (Emily Peck): “A key measure of CEO confidence bounced back this summer… It’s another sign that the business community is coming to terms with tariffs, heartened by the administration’s announcement of trade deals. The jitters triggered by President Trump’s initial ‘Liberation Day’ announcement appear to have eased. A ripping stock market helps, too. By the numbers: Confidence rose 15 points, to 49, in the three months ending in July, per… the Conference Board, a nonpartisan think tank and the Business Council, an association of CEOs. That’s a sharp upward turn.”
August 7 – Reuters (Dan Burns): “The number of Americans filing new applications for unemployment benefits ticked up to the highest level in a month last week… Initial claims for state unemployment benefits for the week ended August 2 rose 7,000 to a seasonally adjusted 226,000, the highest level since the week ending July 5…”
August 2 – Wall Street Journal (Te-Ping Chen and Harriet Torry): “Job seekers are out in the cold this summer. Especially the ones who have been hunting for a while… The number of people unemployed for at least 27 weeks topped 1.8 million, the highest level since 2017, not counting the pandemic’s unemployment surge. The median length of unemployment in the U.S. has also ticked up, from a seasonally adjusted 9.5 weeks in July 2024 to 10.2 weeks last month.”
August 4 – Wall Street Journal (Ed Frankl): “An index of U.S. employment fell to its lowest point since October last year… The Conference Board’s Employment Trends Index, or ETI, fell to 107.55 in July from an upwardly revised 108.19 in June, the research group said… ‘Companies have grown more hesitant amid tariff and policy uncertainty. But companies appear to be pressing pause rather than leaning into layoffs, given that unemployment and slack remain low,’ he added.”
August 3 – Financial Times (Delphine Strauss, Claire Jones and Steff Chávez): “America’s lowest-paid workers are suffering a sharper slowdown in wage growth than their richer peers, adding to pressure on Donald Trump over inequality as he threatens to undermine the reliability of US economic data. Data from the Federal Reserve Bank of Atlanta shows wage growth for the lowest-paid quartile of workers — people earning roughly less than $806 a week — slowed to an annual rate of 3.7% in June, down from a peak of 7.5% in late 2022… Pay for the top 25% of workers is up by 4.7% in the year to June, and for the overall workforce by 4.3%.”
August 5 – Bloomberg (Mark Niquette): “The US trade deficit narrowed in June to the tightest since September 2023 as companies scaled back on imports after a massive surge earlier in the year. The goods and services trade gap shrank 16% from the prior month to $60.2 billion…”
August 7 – Bloomberg (Gerson Freitas Jr and Ilena Peng): “The US agricultural trade deficit hit a record high in the first half of 2025, underscoring the continued decline of American farmers’ long-dominant role in global exports amid President Donald Trump’s trade wars. The value of agricultural exports trailed that of imports by $4.1 billion in June — a gap 14% wider than a year earlier — pushing the sector’s deficit to a staggering $28.6 billion for the first six months of the year… The widening deficit marks a historic reversal for the US agricultural sector, which for the past five decades had consistently run major trade surpluses — even serving as a key foreign policy tool during the Cold War.”
China Watch:
August 4 – Bloomberg: “China’s services activity unexpectedly accelerated in July to the fastest pace in over a year, a private survey showed… The S&P China services purchasing managers’ index rose to 52.6 from 50.6 in June, marking the strongest expansion since May 2024… The result beat the median forecast of 50.4…”
August 6 – Reuters (Joe Cash): “China’s exports beat forecasts in July, as manufacturers made the most of a fragile tariff truce between Beijing and Washington to ship goods, especially to Southeast Asia, ahead of tougher U.S. duties targeting transshipment… China’s exports rose 7.2% year-on-year in July…, beating a forecast 5.4% increase in a Reuters poll and accelerating from June’s 5.8% growth. Imports grew 4.1%, defying economists’ expectations for a 1.0% fall and climbing from a 1.1% rise in June.”
August 6 – New York Times (Li Yuan): “China is a nation of savers. The Chinese government wants its people to spend more and save less. It also wants them to take on more debt, all for the sake of saving the economy from a four-year slump. The national financial regulator urged banks in March to expand consumer lending and offer more flexible repayment terms… Yet many Chinese consumers are wary. An alarming number of them are already defaulting on their debt… For Beijing, expanding access to credit may seem like a quick way to stimulate the economy. But this push for consumers to borrow risks deepening a growing personal debt crisis. Many borrowers, particularly young people, are caught in cycles of debt, driven by poor financial literacy, high youth unemployment and stagnant wages. Those caught in the cycle run the gamut: factory workers, young professionals and gig economy workers. They are people who barely make ends meet while living in fear of default, calls from debt collectors and an overwhelming sense of shame.”
Central Bank Watch:
August 7 – Associated Press (Danica Kirka): “The Bank of England cut its main interest rate… by a quarter percentage point to 4%, as policy makers seek to bolster the sluggish U.K. economy… The committee voted 5-4 in favor of the cut. The rate cut is the bank’s fifth since last August, when policy makers began lower borrowing costs from a 16-year high of 5.25%. The Bank of England’s key rate… is now at the lowest level since March 2023.”
Europe Watch:
August 2 – Financial Times (Attracta Mooney, Alice Hancock and Amy Kazmin): “Europe’s energy systems have come under intense strain this summer as repeated heatwaves have driven up demand for electricity and forced plants to pause production. June was the hottest on record in western Europe, fuelling a rise in the use of air conditioning and prompting a sharp increase in electricity prices…”
Japan Watch:
August 7 – Reuters (Leika Kihara): “Bank of Japan policymakers debated the likelihood of resuming interest rate increases with one signaling the chance of a hike this year, a summary of opinions at the July meeting showed… Some in the board also warned of mounting inflationary pressure in a hawkish tilt underscoring a growing view within the central bank that conditions for raising Japan’s still-low rates costs could fall into place in coming months. ‘The balance within the board seems to be tilting more hawkish,’ which reinforces the chance of another rate hike this year, Daiwa Securities analysts wrote…”
August 6 – Bloomberg (Erica Yokoyama): “Japan’s civil servants are set to receive the biggest pay increase in 34 years, a move that could further reinforce the virtuous cycle of wage and price growth long sought by the Bank of Japan as a precondition for continuing monetary tightening. The National Personnel Authority recommended… a 3.62% increase in average monthly base pay for public employees… This would mark the largest rise since 1991 and, when combined with an automatic bump that already kicked in, bring their total wage gain this year to 5.1%. The change will affect roughly 280,000 workers…”
August 6 – Reuters (Leika Kihara): “The Bank of Japan may be behind the curve in dealing with the risk of high inflation, one private sector member of the government’s top economic council was quoted as saying… ‘In the past, we used to debate whether inflation would reach the BOJ’s 2% inflation target or not. But now, inflation is above 2%,’ the member told a meeting of the council…”
August 5 – Reuters (Satoshi Sugiyama): “Japan’s real wages fell in June for the sixth consecutive month as inflation continued to outpace pay growth…, raising concerns about consumption-led recovery in the world’s fourth-largest economy. Inflation-adjusted real wages, a key determinant of households’ purchasing power, fell 1.3% in June from a year earlier, following a revised 2.6% drop in May… The consumer inflation rate the ministry uses to calculate real wages, which includes fresh food prices but not rent costs, rose 3.8% year-on-year in June…”
August 8 – Bloomberg (Aaron Clark): “Record high temperatures in Japan could curb the country’s rice production, threatening to create shortages of the staple grain and fresh price spikes as public resentment mounts over cost of living. Key rice-producing regions like Tohoku and Hokuriku saw the least amount of rain in July on record that goes back nearly 80 years, while a heat wave this month has broken multiple temperature record… Such weather extremes may impact the harvest that typically starts in late summer, at a time when rice supplies have already been strained by adverse weather in recent years. That risks fanning prices that are already about 50% higher than a year ago, which could heap pressure on household budgets and political leaders.”
EM Watch:
August 4 – Reuters (Marcela Ayres): “Brazil’s central bank… flagged caution over the impact of steeper U.S. trade tariffs, reaffirming its commitment to a policy stance aimed at lowering inflation expectations after signaling interest rates will remain on hold for long. In the minutes from its latest policy meeting, where policymakers paused an aggressive tightening cycle that had increased the benchmark rate by 450 bps to a near 20-year high of 15%, the bank said that the 50% U.S. levies on goods from Brazil could have ‘significant’ effects on specific sectors.”
Leveraged Speculation Watch:
August 8 – Bloomberg (Katy O’Donnell, Catherine Lucey and Katherine Doherty): “The Trump administration is considering selling shares of Fannie Mae and Freddie Mac in an offering that could start as early as this year, according to senior administration officials. The plan could value the government-controlled mortgage giants at some $500 billion or more and would involve selling between 5% and 15% of their stock with an offering expected to raise about $30 billion… A stock sale could provide a windfall for hedge funds and other investors. Bill Ackman’s Pershing Square Capital Management, for instance, holds a significant stake in Fannie, and the billionaire has been publicly lobbying the White House to end the conservatorships.”
August 4 – Bloomberg (Aaron Brown): “Quant equity hedge funds have enjoyed a strong run for nearly two years, with the first half of 2025 being particularly good. But many of the most prominent funds saw losses in June and especially July, due to what quants are calling a ‘garbage rally’ and blaming on retail day traders. This appears to be unprecedented in several respects. Previous meme stock rallies were driven by medium-term retail investors, and previous quant hedge fund losses were steeper but lasted only a few days. Now we seem to be seeing meme day traders inflicting many weeks of small losses. Previous quant equity losses hit long and short positions equally, this time it’s only the short positions. Goldman Sachs… most shorted-stocks basket has surged at a near record pace and its Speculative Trading Indicator is at over three-year highs…”
August 4 – Wall Street Journal (Caitlin McCabe): “Many hedge funds have weathered this year’s trade-war turmoil well. The one big exception: fast-moving quantitative funds that are meant to flourish in tough markets. These funds… use complicated computer algorithms to spot patterns in asset prices, then ride them up or down. The investment approach has a reputation for protecting portfolios in crashes and delivering uncorrelated returns during calmer periods… Trend-following hedge funds lost 9.6% in the first half of this year, on track for their worst annual performance since at least 1998, according to… PivotalPath. Meanwhile, hedge funds more broadly returned 4%, net of fees…”
Social, Political, Environmental, Cybersecurity Instability Watch:
August 6 – Associated Press (Mari Yamaguchi): “Hiroshima… marked the 80th anniversary of the U.S. atomic bombing of the western Japanese city, with many aging survivors expressing frustration about the growing support of global leaders for nuclear weapons as a deterrence. With the number of survivors rapidly declining and their average age now exceeding 86, the anniversary is considered the last milestone event for many of them. ‘There will be nobody left to pass on this sad and painful experience in 10 years or 20 years,’ Minoru Suzuto, a 94-year-old survivor, said after he kneeled down to pray at the cenotaph. ‘That’s why I want to share (my story) as much as I can.’ The bombing of Hiroshima on Aug. 6, 1945, destroyed the city and killed 140,000 people. A second bomb dropped three days later on Nagasaki killed 70,000.”
August 7 – Bloomberg (Mark Chediak, Jennifer A Dlouhy and Ari Natter): “President Donald Trump is escalating his attacks on wind and solar power from the rhetorical to the tangible, mounting a rapid-fire campaign that exceeds the industries’ worst fears. In just the past few weeks, the Trump administration instituted permitting reviews that threaten US wind and solar developments. It imposed standards that would essentially prevent new developments on federal land. It rescinded Biden-era decisions earmarking coastal waters for future wind turbines. And on Wednesday it yanked approval for a massive planned wind farm in Idaho. The pace and range of strikes against renewables — alongside several other actions that serve to prop up fossil fuels and nuclear power — have whipsawed wind and solar developers that had grown accustomed to federal support.”
August 6 – BBC (Koh Ewe and Helen Willetts): “While torrential rains lash China, Pakistan and parts of India, sweltering heat has enveloped Japan and South Korea as extreme weather claims hundreds of lives in the region. Climate change has made weather extremities more intense, frequent and unpredictable, scientists say. This pattern is especially pronounced in Asia, which according to the World Meteorological Organization is warming nearly twice as fast as the global average. The region has lost $2 trillion to extreme weather – from floods to heatwaves and droughts – over the past three decades, according to the annual Climate Risk Index survey.”
August 5 – Bloomberg (Shoko Oda): “Japan set a new temperature record for the second time in a week amid a scorching heat wave affecting most of the country. Temperatures in Isesaki City in Gunma prefecture, which is northwest of Tokyo, rose to 41.8C (107F)… Climate change is a crucial factor in driving warmer temperatures, which in turn are straining everything from power grids to health care systems as people require more cooling and succumb to heat related-illnesses.”
August 8 – CNBC (Sam Meredith): “Top insurers fear the climate crisis could soon outpace industry solutions, effectively threatening to make entire regions around the world uninsurable. Günther Thallinger, a board member at Allianz, one of the world’s biggest insurers, recently outlined how the world is fast approaching temperature levels where insurers will no longer be able to offer cover for financial services, such as mortgages and investments. In practice, this scenario implies some may face difficulty being able to afford home insurance cover, which is typically a prerequisite for getting a mortgage.”
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