From Yahoo Finance, February 2:
.... Here are some of the most actionable insights from the Street that have crossed my inbox so far.
Morgan Stanley Public Policy Research Team
"Our economists expect that fully implemented tariffs would have meaningful consequences. A recession in Mexico becomes the base case. US Inflation could be 0.3% to 0.6% higher vs baseline over the next 3-4 months (putting headline personal consumption expenditures inflation at 2.9% to 3.2%) and US growth could be -0.7% to -1.1% lower versus baseline over the next 3-4 quarters (putting real GDP growth at 1.2% to 1.6%). We see a similar or larger growth drag than the 100 basis point hit to Asia and China’s growth in 2018-19. Full implemented tariffs with staying power don’t appear to be in the price of key markets: A bullish scenario for US Treasury duration, as weaker growth expectations increase demand beyond short maturities; meaningful US Dollar strength relative to Peso & Canadian Dollar; US equities may come under pressure, and services should outperform consumer goods."EvercoreISI Economics Team
"US growth is likely to take a hit as countries move away from US exports, investment falls, and employment declines. Federal receipts should increase, all else equal; some research estimates $1 trillion over the next decade. Our macroeconomic teams have estimated a 40 basis point increase in inflation and a 40 basis point drag on growth in the back half of the year."EvercoreISI China Strategist Neo Wang
"Timing of Trump’s tariff announcement likely offended both Chinese government and people because the country is still on Chinese New Year holiday. Moreover, news of the tariff slap arrived in China in the morning of February 2, coinciding with this lunar year’s 5th day, which is the day for most Chinese to worship their God of Wealth with offerings and wishes. Unfortunately, Trump stole the attention with his wealth-destructing tariffs, an inauspicious development indeed. This first 10% tariff seems at least aimed to gain an upper hand in the negotiation on TikTok, or force Beijing to the table if negotiation hasn’t started."JP Morgan Metals & Mining Analyst Bill Peterson
"Many investors we’ve spoken with continue to feel recent rhetoric may be a negotiation tactic given timing has been pushed out since Inauguration Day and timing was briefly pushed to 3/1 before being reversed. Implications to demand destruction longer-term always remains a key concern. Among our coverage, we see the biggest financial risk to Alcoa (AA), GrafTech International (EAF) and Cleveland Cliffs (CLF). On AA, ~40% of Alcoa’s operating smelter capacity is in Canada (vs. only 13% in the US) and ~70% of that production is shipped to the US. Management has indicated it would take 1-2 quarters for trade flows to reshuffle, which would have material implications on near-term earnings. On EAF, its Mexico-based Monterrey facility is the primary source of supply for its US and North America-based customers, likely driving customers to shift to cheaper US-based production (i.e., Tokai/Resonac) and/or India imports, which have been on the rise as of recent. If US graphite electrode pricing were to move high enough (and stay sticky) this could incentivize GrafTech to restart its US-based St.Mary’s facility, but this is a high-cost facility and the underlying demand environment remains sluggish. On CLF, we note risk to its newly acquired Canada exposure given 25-40% of SteelCase's revenues (FY22-1H24) were largely generated in the US."22V Research Strategist Michael Hirson
"For the near term, we expect Beijing to impose only symbolic tariff increases (if any) on China’s imports from the US. We also expect China’s informal retaliation (such as directing commodity purchases away from the US) to be light as Beijing continues to explore a broader deal with Trump. Could Beijing mollify Trump with actions on fentanyl? The biggest US complaint with Beijing is that Chinese chemical companies are the main source of precursors for fentanyl products, which are then produced in Mexico and third countries. US-China cooperation on fentanyl has improved since the November 2023 Biden-Xi summit, though Beijing could do more to satisfy US concerns with a tougher crackdown on firms exporting to Mexico. Beijing will likely take some specific actions in this regard in coming months, while promising to take stronger measures as a part of a potential US-China deal. What about the broader outlook on US-China trade tensions? We continue to hold a base case that Trump will end up imposing additional tariffs on China imports beyond this initial 10%. These may wait for the outcome of trade policy reviews due on April 1, but of course could come sooner (if Trump becomes impatient) or later (if he explores a US-China trade deal). Trump’s fondness for tariffs, the optics of a very large deficit with China, and the domestic politics of targeting China all make it unlikely that he stops here. We do not dismiss the possibility of a US-China trade deal, though see the political bar as fairly high, especially in this first year of Trump 2.0."Bernstein Digital Assets Analyst Gautam Chhugani
"Bitcoin and crypto markets are a good reflection of risk-on sentiment in the near term. If tariffs mean stronger dollar, higher inflation and reduced prospects of rate cuts in the short term, it means lower global liquidity for risk-on assets. In the short term, Bitcoin and crypto markets correlate with risk-assets and particularly during weekends, crypto is the only barometer of risk. Thus, crypto sell off is not surprising. Given the global macro dislocation and potential inflationary pressures, shouldn't Bitcoin act as a store of value? With both stronger dollar and higher inflation, why has Bitcoin not reacted as a store of value? Bitcoin trades differently on different time frames. On a longer time frame, as governments carry higher debt and higher deficit, leading to more monetary debasement, Bitcoin holds relative value to the dollar, as is evident in Bitcoin's long term compounding history. But over short time frames, Bitcoin is correlated to risk-assets. There is no evidence of short term un-correlated Bitcoin market unless there is a flight to safety from the fiat banking system."....
....MUCH MORE
