Good morning,
An unplanned Morning Note this morning. I got yesterday perfectly wrong. It’s difficult to build in expectations of more self-destructive behavior, and yesterday’s White House social media rant against the Fed Chair is just unadulterated self-destruction.
Stocks, the dollar, and longer-dated Treasuries fell yesterday. After rallying +1% in the final minutes of the trading session, the S&P 500 Index closed down -2.36% for the day. The selling accelerated early after President Trump criticized Fed Chair Jerome Powell on social media. In addition, China raised the stakes in the tariff duel, warning countries against making deals with the US that could harm Beijing’s interests and threatening reciprocal countermeasures if they do.
Although it was a bit of a sideshow to the Fed and tariff headlines yesterday, the Conference Board’s Leading Economic Index (LEI) for March was reported and fell more than expected by -0.7%. The biggest decline since October 2023. Much of the deterioration was due to falling consumer expectations, stock prices, and factory orders. It suggests slower economic growth over the next six months, causing the Conference Board to revise down their projection for real GDP growth for this year to 1.6%. This would be below-potential growth but not necessarily a recession. The report attributed the downgrade to the escalating trade war, which could lead to “higher inflation, supply chain disruptions, less investing and spending, and a weaker labor market.”
We are seeing a bit of normalization this morning to yesterday’s amplified fears of Fed-Independence. Futures are up +0.9%, the yield curve has flattened, and the dollar is stable (at least). Gold, meanwhile, continues to rip higher – global momentum is a powerful force and will swamp fundamentals (whatever they are for gold) when it roars.
This is a time where every asset (except gold) is hostage to headlines. Here’s hoping (I know it’s not a strategy) that the Fed-Independence headlines fade and the market recaptures/repairs some of the damage caused by them. This morning is a good start.
Be well,
Mike
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