Morning Roundup

By Mark Masterson on April 15, 2025

Good morning,

Below are the news items moving markets today:

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Executive Summary

Markets seem to need a kick daily these days.

We saw it last Friday with the Fed statement that it was “ready to support markets” etc.

Then this weekend it was the tech/phone related tariff pause news.  Yet – the morning rise was reversed and markets were red.  Just in time was this little beauty from another  Fed spokesman who suggested they are going to ease……

‘Fed Governor Waller says threat of recession could favor earlier rate cuts:

• In a speech, Fed Governor Waller said that Trump’s tariffs were one of the biggest shocks to the US economy in decades, and policy remains highly uncertain and requires Fed flexibility.
• Waller said if this scenario happens and slowdown is significant or threatens recession, he would expect to favor cutting sooner and to a greater extent than previously thought.

That was all it took to close the market green.

As we know, both Trump and Bessent are watching the stock market and the bond market.  Yes, I know – Trump says he is not watching the stock market…..

But then he says…….

• “We had the largest gain in the stock market in history in every single category last week,” Trump has said.
• Trump: Markets very strong once they got used to tariffs.

Bessent chimed in yesterday and wanted to send a message to markets that he stands ready to step in with bond yields – if needed……

• U.S. TREASURY SECRETARY BESSENT: TARIFFS ON CHINA ARE BIG NUMBERS, NO ONE THINKS THEY’RE SUSTAINABLE AND WANTS THEM TO REMAIN
• US Treasury Secretary Bessent: We’re a long way from a ‘break the glass’ situation.
• US Treasury Secretary Bessent: This is one of those occasional shocks you get in the trading community.
• US Treasury Secretary Bessent when asked if the Treasury has plans to respond to bond market moves: The Treasury has lots of tools, but we’re a long way from that.
• The US Treasury Secretary just said: We’re thinking about a successor for next fed chair, we’ll start interviewing candidates in the fall.
• US Treasury Secretary Bessent: The VIX spiked and has likely peaked.

Essentially – Bessent is saying the Treasury can buy bonds to keep a lid on yields if needed.  (a form of QE)

• US Treasury Secretary Bessent: The Treasury has big toolkit, could boost buybacks.
• Treasury Secretary Scott Bessent, who took a dim view of his predecessor’s debt issuance policy by alleging it inappropriately influenced financial conditions, said Treasury could increase buybacks of off-the-run securities if needed to stabilize markets https://t.co/0txeGybDkJ

Tariffs are getting quite confusing.  Its difficult to know what the rate is now given tariff concessions, etc.

• Bloomberg Economics updated its estimate of the average US tariff rate today.  They now estimate it is 20.4% above last year’s rate of 2.4%, or 22.8%.
• Their initial estimate after Liberation Day was 24%. (China tariffs drive this number, and since they are retaliating, they are not getting a 90-day pause).

So, it has hardly changed and is still 10 times higher than last year, and the highest level in a century.

Bianco 4 15 25

Expectations of recession are rising – likely due to the impact on trade of the tariffs.

Bloomberg’s economist survey for Q1 ’25 GDP continues to fall.

Bloomberg 4 15 25

If we do see a growth slowdown or recession – it will not be due to spending.

So far, we are on pace to spend as much or more this year as we did last year. 

• Federal spending is higher since President Trump took office even as the Department of Government Efficiency slashes contracts, cuts jobs and ends diversity programs https://on.wsj.com/42vUAlM

Keep in mind this is 6 months in.  4 of those months were the Biden Administration, but the last two were on Trump.

WSJ 4 15 25

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Articles of Interest:

• Trade/tariffs:
  • Trump looking at temporary tariff relief for autos, initiates chip, pharma import probe (Bloomberg, Reuters, NY Times)
  • Five small businesses sue Trump to block “Liberation Day” tariffs citing unconstitutional bypassing of Congress using emergency powers (NBC)
  • Japan’s talks with US this this week set to demonstrate White House’s appetite for deal making (Bloomberg)
  • Japan reviewing non-tariff trade barriers including regulations on auto and agriculture imports, as it seeks relief from Washington (Nikkei, Bloomberg)
  • US pressures EU to choose sides in China trade decoupling amid tariff threats (IrishTimes)
  • EU trade chief Sefcovic says fair deal on tariffs will require significant joint effort from EU and US (Reuters)
  • US to impose 21% tariffs on tomato imports from Mexico after withdrawing from agreement (Bloomberg)
  • Volume of goods processed by Chinese ports slows for first time since LNY holiday as tariffs take effect (Bloomberg)
• Markets:
  • Bessent says Treasury has big toolkit to address surge in yields; does not see evidence of sovereigns selling Treasuries (Bloomberg)
  • Treasuries term premium highest since Sep-2014 (Bloomberg),
  • Lower rated corporate borrowers have failed to issue debt since ‘Liberation Day’ tariffs (FT)
• Central banks:
  • Atlanta Fed’s Bostic says bold policy change in either direction not prudent, favors waiting (Bloomberg, Reuters )
  • ECB survey sees tightening in corporate credit standards (Reuters)
• Washington:
  • Treasury Secretary Bessent says everything on table when it comes to paying for tax cuts (Bloomberg)

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Charts of the day:

Some Bank of America Survey data…….

BofA survey takes bearish turn, shows record intent to cut US stock allocations:

• Latest BofA Global Fund Manager Survey showed fifth-most bearish FMS sentiment in past 25 years and fourth-highest recession expectations in past 20 years at net 42%.
• Said investors max bearish on macro, though not yet max bearish on market, noting cash level of 4.8% below peak fear norm of 6%.
• However, team also expects April asset price lows to hold near-term, as big upside needs tariff easing, Fed rate cuts, or economic data resilience.
• Allocation to US stocks down to net 36% underweight, most since May-23 and biggest two month drop on record at 53pp.
• Hard landing expectations also up to 49% (from 11% in March), global growth expectations hit 30 year low, and global inflation expectations in next 12 months up record 50pp m/m to net 57%.
• Trade war biggest tail risk, while long gold now seen as most crowded trade, breaking 24-month streak for long Mag 7.
• FMS takeaways parallel some bearish commentary from strategists recently, including several S&P 500 EPS and price target cuts on tariff and growth uncertainty, though many still see equity rebound by year-end (Bloomberg).

Not sure I like to see this…. Gold is the most crowded trade at the moment.

Suggests to me that – once gold’s time comes to take a breather and correct – it may be a decent pull-back.

BofA 4 15 25

About both sentiment and positioning……

Investors haven’t been this bearish in 30yrs, BofA poll shows. 82% of fund managers expect the global economy to weaken, and a record number intend to reduce exposure to US equities.

Note – so folks are getting nervous BUT – they have yet to reduce their equity exposure.  Nobody has sold.  In fact, they have been buying the dip hard during this pullback.

Cash stands at 4.8% of assets and would typically need to rise to 6%, BofA added. 

BofA 4 15 25

One guy has sold many times over the past few quarters.

Buffet has not put his cash to work.  In fact, he raised more in Q1.

Warren Buffett is sitting on enough cash to buy 476 companies in the S&P 500

FT 4 15 25

Here is why – most likely.

The Buffett Indicator – which shows the value of stocks to GDP – remains very elevated.

This will have to come down for Buffett to add cash – in my opinion.

Advisorperspectives.com 4 15 25

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Quote of the day:

“All cruelty springs from weakness.” — Seneca