Bloomberg Headline: Markets Are Discovering The Treal Trump Trade Is “Sell America.” [Bloomberg, 2025-04-21]
January 2025 - April 2025: The Bloomberg Dollar Index Has Had Its Worst Annual Start Since The 2005 Creation Of The Index. According to Bloomberg, “A Bloomberg gauge of the greenback is down more than 7% this year, its worst annual start since the index’s 2005 launch. Most eye-catching, however, has been the slump in Treasuries, which — thanks to the backing of Uncle Sam — typically do well when other markets are being roiled, as on Sept. 11, 2001 and during the financial crisis.” [Bloomberg, 2025-04-21]
April 2025: Treasury Yields Surged By The Most In Any Month In More Than Two Decades. A Period That Includes The Global Financial Crisis, Covid Pandemic, and Post-Covid Inflation. According to Bloomberg, “This month has witnessed the biggest weekly surge in the yield on 10-year Treasuries — a benchmark that guides the rate of everything from mortgages to corporate borrowing — in more than two decades. Yields eased from a peak near 4.6% after Trump walked back some of his tariff plans — reportedly on concern about the bond rout — but they’ve been climbing again since his Fed-bashing gained steam.” [Bloomberg, 2025-04-21]
Paul Singer: The Dollar Might Lose Its Reserve Status. According to Bloomberg, “Just a day earlier, Paul Singer, founder of Elliott Investment Management, warned the crowd that he feared the US dollar might lose its reserve currency status, according to people present, who asked not to be named discussing a private conference. Singer also cautioned that geopolitical tensions could boil over into war, without specifying which conflict.” [Bloomberg, 2025-04-21]
WSJ Headline: “Dow Headed For Worst April Since 1932 As Investors Send ‘No Confidence’ Signal.” [Wall Street Journal, 2025-04-21]
Rotation Away From The U.S.
Code
include("../scripts/oxocarbon-plot.jl")usingYFinance, DataFrames, Datestheme(:oxocarbon)us_stocks =get_prices("VTI"; interval="1d", startdt=Date(2024,11,1), enddt=Date(2025,4,22)) |> DataFrame exus_stocks =get_prices("VEU"; interval="1d", startdt=Date(2024,11,1), enddt=Date(2025,4,22)) |> DataFrameus_bonds =get_prices("BND"; interval="1d", startdt=Date(2024,11,1), enddt=Date(2025,4,22)) |> DataFrame exus_bonds =get_prices("BNDX"; interval="1d", startdt=Date(2024,11,1), enddt=Date(2025,4,22)) |> DataFrame# Build a main data framedf =DataFrame(; date =Date.(us_stocks.timestamp), us_stocks = us_stocks.adjclose, exus_stocks = exus_stocks.adjclose, us_bonds = us_bonds.adjclose, exus_bonds = exus_bonds.adjclose,)# Normalize each to 100 at November 5, 2024df.us_stocks =100.0.* (df.us_stocks ./ df.us_stocks[3])df.exus_stocks =100.0.* (df.exus_stocks ./ df.exus_stocks[3])df.us_bonds =100.0.* (df.us_bonds ./ df.us_bonds[3])df.exus_bonds =100.0.* (df.exus_bonds ./ df.exus_bonds[3])# Plot the data against each other #=plot(df.date, df.us, label="U.S. Market", title="American vs Non-American Stocks", xlabel="Date", ylabel="Value (Election Day = 100)")=##=plot!(df.date, df.exus, label="World ex U.S.")=#plot(df.date, df.us_stocks ./ df.exus_stocks, title ="Preformance Since Election Day", xlabel="Date", ylabel="Ratio, Stock Prices, Blue Line", label="", legend =:left)right_axis=twinx()plot!(right_axis,df.date, df.us_bonds ./ df.exus_bonds, title ="Preformance Since Election Day", ylabel="Ratio, Bond Prices, Black Line", color=colorant"#525252", legend =false)vline!([Date(2024,11,5)], label="Election Day", linestyle=:dash)hline!([1], label="", linestyle=:dash)vline!([Date(2025,1,20)], label="Inaguration", linestyle=:dash)vline!([Date(2025,4,2)], label="Tariffs", linestyle=:dash)
Comparing these plots, we can see that up until Trump announced his tariffs, the standard inverse correlation between stocks and bonds was in place. Then, after Trump’s tariffs were put in place, prices for American stocks and American bonds declined together as capital fled the country.
Real Effects
April 2025: The Frozen IPO Market Forced Turo Inc To Withdraw Its Planned Offering, Leading To A Roughly 15 Percent Cut In Headcount. According to Bloomberg, “Car-rental startup Turo Inc. is cutting about 150 jobs after withdrawing plans for an initial public offering. ‘Due to ongoing economic uncertainty and in order to strengthen our position for long-term growth, Turo has made the very difficult decision to reduce the size of our team by approximately 15%,’ a spokesperson said in a statement to Bloomberg.” [Bloomberg, 2025-04-16]
A Declining Investment Climate
“The Current Tariff Situation Is Losing The Appetite From Other Countries To The US.” Head Of One Of Japan’s Largest Beverage Companies Expressed Discomfort With The Idea Of Investing In The U.S. According to Bloomberg, “US President Donald Trump’s tariffs could drive a recession that will make companies reluctant to invest in the world’s largest economy, according to the head of one of Japan’s biggest beverage makers. ‘The current tariff situation is losing the appetite from other countries to the US. This is really killing the appetite from the world,’ Takeshi Niinami, chairman and chief executive officer of Suntory Holdings Ltd., said in an interview with Bloomberg TV Tuesday. The situation is ‘really concerning,’ he added.” [Bloomberg, 2025-04-22]
Niinami Said He Would Invest In Other Parts Of The World Instead. According to Bloomberg, “Trump’s efforts to reshape international trade have led to wild swings in global markets and raised concerns the US economy could enter a recession. ‘Consumer confidence has been waning tremendously,’ Niinami said. ‘Consumers nowadays are not spending willingly so they go to the economy instead of the premium products.’ If the trend continues, companies will focus on other parts of the world, like India and Indonesia, he said.” [Bloomberg, 2025-04-22]
Tariffs
Shipper Chaos
The Incentive To Abandon Goods That Have Been Purchased Has Forced Shipping Compnaies To Demand Full Payments Upfront. According to the Wall Street Journal, “Some shipping companies are so concerned about U.S. importers abandoning their cargo and declining to pay shipping fees that they are asking for full payment upfront. Hong Miller, owner of Wincity Trade, an import-export company in Grosse Pointe, Mich., said her longtime shipping company usually requires only a deposit upfront but recently asked for full payment.” [Wall Street Journal, 2025-04-21]
Effect On Growth
IMF: Trump’s Tariffs Cut Forecast American Output Growth By A Third. According to the Washington Post, “But the slowdown will be particularly sharp for the U.S. economy, which will grow this year at an annual rate of 1.8 percent, one third lower than its January estimate and a full percentage point below last year’s mark, the fund said.” [Washington Post, 2025-04-22]
JPMorganChase: Trump’s Tariffs Caused September 2025 Forecast Inflation To More than Double To Five Percent. According to the Washington Post, “On Monday, economists at JPMorganChase said Trump’s trade war may be enough to push the U.S. and global economies into recession by causing so much uncertainty that businesses and consumers delay spending. As tariffs take hold, consumer price inflation will run at an annual rate of 5 percent through the end of September, more than double the current figure, they said.” [Washington Post, 2025-04-22]
IMF: Trump’s Tariffs Caused The Forecast Of Global Growth To Slow Sharply, With Progress On Inflation Also Slowed. According to the Washington Post, “The global economy will slow sharply this year, weighed down by President Donald Trump’s imposition of the highest import taxes in more than a century and the cloud of uncertainty that has billowed in their wake, the International Monetary Fund said Tuesday. Global growth will downshift to an annual rate of 2.8 percent, half a percentage point lower than projected in January and a ‘significant slowdown,’ the fund said. Only a tepid rebound to 3 percent growth is likely in 2026, leaving the world economy’s expanding for the next two years well below its long-run average of 3.7 percent, according to the fund. Progress on bringing inflation under control also will be hurt.” [Washington Post, 2025-04-22]
Tim Harford: “If The World Suffers No More Than A Recession As a Result [Of Trump’s Behavior], We Will Have Escaped Lightly.” According to Tim Harford in the Financial Times, “The sheer uncertainty is disastrous for the real economy, too. Corporate decision makers would like to get on with the making of decisions. Should they redesign their supply chains? Relocate production to avoid tariffs? Shut down some operations and sack their staff? Start building and hiring elsewhere? For now the only reasonable response is to hold on tight to the giant mahogany desk in front of them and pray the world stops spinning. This is the paradox, then: stock market investors are cautiously optimistic because they expect that Trump is going to change his mind; physical investments are on hold because people are waiting to see what will happen after Trump changes his mind; and bond market investors are nauseated because Trump keeps changing his mind. But it is the bond market investors on whom the world’s financial system rests. Trump has been in office for just three months. That leaves 45 months to go. What should retail investors do now? The range of outcomes is not easy to discern. The US has clearly lost credibility — as an ally, as a place to invest, as a trading partner and as a country where the rule of law is paramount. If the world suffers no more than a recession as a result, we will have escaped lightly.” [Tim Harford in the Financial Times, 2025-04-19]
Bloomberg Economics: Trump’s Tariffs Will Cut 2025 Growth From 1.9 Percent To 0.6 Percent. If Correct, It Would Be The Worst Year Of Growth Outside Of A Deep Recession. According to Bloomberg, “Take historic steps, expect historic reactions, Bloomberg Economics says in its latest analysis of the global economic impact from Trump’s tariff program. […] ‘Policy uncertainty (it’s still not clear where tariffs will settle) and modeling uncertainty (the shocks have no precedent in the post World War II data) mean the error band around that forecast is wide,’ the economists highlighted. Looking just at the US, the new import duties ‘act like a massive tax hike,’ and indicate growth for this year will come in at a 0.6% rate, measured comparing the fourth quarter to the fourth quarter of 2024. That’s down from a previously projected 1.9%. Since the turn of the century, the only worse years for growth performance than that were during deep recessions — the quick one in 2020 and the prolonged one in 2008 and 2009. It’s even worse, by that GDP measure, than 2001, amid the dot-com downturn.” [Bloomberg, 2025-04-22]
“It Could Be Corruption, But It Could Just Be Incompetence, To Be Honest, This Was Such A Hurried Mess, I Am Not Sure Who Got Into The White House To Talk To Folks About The List.” According to ProPublica, “‘It could be corruption, but it could just as easily be incompetence,’ a lobbyist who works on tariff policy said of PET resin’s inclusion. ‘To be honest, this was such a hurried mess, I am not sure who got into the White House to talk to folks about the list.’” [ProPublica, 2025-04-22]
Following The Announcement Of Trump’s Tariffs, There Was Confusion About Exemptions, But A Notable One Went To Benefit A Major Company Owned By Republican Mega-Donors. According to ProPublica, “After President Donald Trump announced sweeping new tariffs earlier this month, the White House released a list of more than a thousand products that would be exempted. One item that made the list is polyethylene terephthalate, more commonly known as PET resin, the thermoplastic used to make plastic bottles. Why it was spared is unclear, and even people in the industry are confused about the reason for the reprieve. But its inclusion is a win for Reyes Holdings, a Coca-Cola bottler that ranks among the largest privately held companies in the U.S. and is owned by a pair of brothers who have donated millions of dollars to Republican causes. Records show the company recently hired a lobbying firm with close ties to the Trump White House to make its case on tariffs. Whether the company’s lobbying played any role in the exemption is unclear. Reyes Holdings and its lobbyists did not respond to questions from ProPublica. The White House also did not comment, but some industry advocates say the administration has rebuffed requests for exemptions. The resin’s unexplained inclusion on the list exemplifies how opaque the administration’s process for crafting its tariff policy has been. Major stakeholders are in the dark about why certain products face levies and others don’t. Tariff rates have been altered without any clear explanation for the changes. Administration officials have given conflicting messages about the tariffs or declined to answer questions at all.” [ProPublica, 2025-04-22]
Despite Imports Having Been Banned Under The Biden Administration, The Trump Administration Has Looked To Legalize Asbestos Imports, And Provided A Tariff Exemption For It. According to ProPublica, “In the executive order formalizing Trump’s new tariffs, including baseline 10% tariffs for almost all countries, exemptions were broadly defined as products in the pharmaceutical, semiconductor, lumber, copper, critical minerals and energy sectors. An accompanying list detailed the specific products that would be spared. But a ProPublica review of that list found many items that don’t fit neatly, or at all, in those broad categories, and some items that fall squarely within the categories were not spared. The White House exclusions list, for example, included most types of asbestos, which is not generally considered a critical mineral and doesn’t seem to fit in any of the exempted categories. The cancer-causing mineral, which is not generally considered critical to national security or the U.S. economy, is still used to make chlorine, but the Biden administration’s Environmental Protection Agency banned imports of the material last year. The Trump administration has signaled it may roll back some of those Biden-era restrictions. A spokesperson for the American Chemistry Council, which had pushed back on the ban because it could hurt the chlorine industry, said the trade group played no role in lobbying for asbestos to get a tariff exemption and didn’t know why it was included. (Two major chlorine companies also showed no indication of lobbying on the tariffs in their disclosure forms.)” [ProPublica, 2025-04-22]
Retaliation
March 2025: Chinese Imports Of American Goods Dropped Sharply. According to Bloomberg, “China sharply reduced imports of many US commodities last month, in some cases to zero, as the trade war between the world’s two biggest economies intensified. Among the worst affected were purchases of liquefied natural gas and wheat, which both fell to nothing in March, according to Chinese customs data released on Sunday. The US accounted for 17% of China’s wheat imports last year, and 5% of its LNG. China imposed retaliatory duties of 10% to 15% on US energy products in February, and at a similar level on agricultural goods in March. China’s purchases are likely to dwindle even further after the trade war kicked into higher gear in early April, when both sides launched blanket tariffs of more than 100% on each other’s goods. Other farm products saw steep declines in March. American cotton imports plunged 90% from the same month last year to just over 14,000 tons. Corn imports fell to less than 800 tons, the lowest level since February 2020.” [Bloomberg, 2025-04-21]
Manufacturing Decay
April 17, 2025: Volvo’s Layoffs At American Truck Plants Jumped To Between 300 And 450, On Top Of The 53 Already Laid Off As “Heavy-Duty Truck Orders Continue To Be Negatively Affected By Market Uncertainty.” According to ABC27, “Hundreds of workers will be laid off at two truck plants in Pennsylvania and Maryland as company officials say orders are down amid market uncertainty. Volvo Group North America confirmed to abc27 News that 250-350 will be laid off from the Mack Trucks plant in Macungie, near Allentown, along with 50-100 people from the Volvo/Mack powertrain plant in Hagerstown, Md. Volvo owns Mack Trucks and the Hagerstown plant manufactures engines, transmissions, and drivetrains for both brands. ‘Heavy-duty truck orders continue to be negatively affected by market uncertainty about freight rates and demand, possible regulatory changes, and the impact of tariffs,’ a Volvo spokesperson told abc27 News. ‘We regret having to take this action, but we need to align production with reduced demand for our vehicles.’ Forty-three workers had already been laid off from the Hagerstown plant this year, the company said.” [ABC27, 2025-04-17]
April 18, 2025: Volvo Raised Its Layoff Range To 550 To 800. According to CNBC, “Volvo plans to lay off as many as 800 workers at three U.S. facilities over the next three months due to market uncertainty and demand concerns in the face of President Donald Trump’s tariffs, a spokesperson said on Friday. Volvo Group North America said in a statement it has told employees it plans to lay off 550-800 people at its Mack Trucks site in Macungie, Pennsylvania, and two Volvo Group facilities in Dublin, Virginia, and Hagerstown, Maryland.” [CNBC, 2025-04-18]
Trivium Packaging Paused Investment And New Hiring Due To Anticipated Higher Intermediate Good Expenses. According to Bloomberg, “For Trivium Packaging, a manufacturer of steel and aluminum containers for everything from canned foods to aerosol sunscreens, the tariffs have caused an immediate and rapid increase in costs for their main raw materials. The steel it uses to make 3 billion tin cans in the US each year is all imported, said Rob Huffman, president of the company’s global aerosols and beverage business. So are the aluminum ingots that are a crucial component of aerosol cans. ‘Even if we wanted to buy domestically, we can’t because they don’t make what we need to make our product,’ said Huffman, who’s based in Ohio. The company has been trying for years to get domestic steel producers to ramp up their production of tin plate, he said, but factories tend to be focused on making steel for cars and construction. In the meantime, Trivium has invested more than $400 million in its US production facilities over the past decade, leaving it with machines that rely on the imported tin plate. Trivium has shelved any expansion plans in the US for now, and the only hiring happening at its five US plants is to fill in staff losses due to attrition. Like at Humanscale, much of workers” time is taken up figuring out the immediate changes needed to comply with tariffs.” [Bloomberg, 2025-04-17]
WSJ Headline: “Big Oil Is Offshoring Its Prized Engineering Jobs To India.” [Wall Street Journal, 2025-04-22]
April 2025: Stellantis Announced It Would Pause Production At A Detroit Plant. According to the Detroit News, “Stellantis NV’s Detroit Assembly Complex plants that build Jeep Grand Cherokee and Dodge Durango SUVs will pause production next week, the latest of several plant cutbacks made by the automaker in recent weeks. The Mack and Jefferson North facilities in east Detroit will halt production for the week of April 28, with Mack also scheduled to take a week off starting May 19. A company notice sent to Mack workers said several types of employees working in paint and repair are still expected to report” [Detroit News, 2025-04-21]
April 2025: Aerospace Giant RTX Projected $850 Million In Tariff-Related Hits To Profits. According to Bloomberg, “Aerospace and defense giant RTX Corp. shares fell as much as 9.3% in morning trading after the company said tariffs stemming from President Donald Trump’s trade war pose a significant risk to operating profit. The company said it’s bracing for an $850 million tariff hit to operating profits, including $250 million from Canada and Mexico and $250 million from duties on trade with China. The figure also includes actions available to the company to mitigate the impact.” [Bloomberg, 2025-04-22]
Context: RTX’s Optimism On Foreign Demand For American Products
Despite projecting tariff-related profit cuts, RTX still expressed optimism about foreign markets. If foreign opinions about American products continue to decline, especially in an industry as tied to the government as the aerospace and defense one, it is doubtful these will be true.
Outlook: Market Shenanigans
Crypto Takeovers Of Small Businesses
April 2025: Crypto Trading Firm GSR Put $100 Million Into The Previously $3 Million Upexi Inc In Order To Buy Solana From The Public Company Wrapper. According to Bloomberg, “Upexi Inc. is raising $100 million as part of a pivot that will see the company start to accumulate the cryptocurrency Solana, according to a Monday statement. The company’s shares surged more than 300% in early trading. Upexi, which had a $3 million market capitalization as of the close of trading last week, announced it has entered into agreements with investors to buy about 43.9 million shares of its common stock, or pre-funded warrants, in a private placement at a price of $2.28 per share. The closing of the offering is expected on April 24. GSR, a crypto trading and investment firm, is leading the investment and said its involvement underscores the firm’s confidence in Solana as a leading high-performance blockchain.” [Bloomberg, 2025-04-21]
Multiple Other Crypto Companies Have Preformed Similar Transactions, Emulating MicroStrategy (Now Strategy). According to Bloomberg, “It’s the latest spin on the business model of Michael Saylor’s Strategy, which has amassed a Bitcoin stockpile worth about $45 billion since it began investing in the original digital asset as a hedge against inflation in 2020. Copycat Bitcoin buyers — such as Japan’s Metaplanet Inc. — have sprung up around the world in recent years. Their purchases are typically funded through the sale of stock and other financial instruments, including convertible notes. Now the imitation game is spilling over into other cryptocurrencies. On April 7, a team of former Kraken executives bought a majority stake in Janover Inc., a real estate financing firm. The company said in a statement that it would begin allocating its treasury reserve to digital assets, starting with Solana. Janover announced the purchase of $10.5 million worth of Solana tokens on April 15. Its stock price has ballooned by more than 1,000% since the Kraken team took over, according to data compiled by Bloomberg.” [Bloomberg, 2025-04-21]
Selling Volatility And Undermining The Stock Market
The core of what has made MicroStrategy so successful is that, as a public company, it can raise money in more varied ways than a pure investment fund can. A key thing that it has done is sell what are called “convertible” bonds, and use the proceeds to buy Bitcoin. Those securities are bonds that, if the stock rises to a specific price, can be converted into stock.
Buyers of these securities generally employ a strategy called “convertible arbitrage” where they buy the convertible bond and short the stock. This strategy is, in essence, a bet that the stock will be volatile. The strategy’s positive volatility exposure comes from the asymmetric nature of convertible bonds themselves. These securities combine a corporate bond with an embedded call option on the company’s stock. When volatility rises, the option component becomes more valuable (due to option pricing fundamentals), while the arbitrageur’s short stock position limits downside risk. Therefore, the arbitrageur profits whether the stock makes dramatic moves up (through the convertible’s option value) or down (through the short stock hedge).
Crypto markets are extremely volatile, and so for arbitrageurs, there is a lot of appeal in these securities.
To other professional investors, there is appeal in the shares of these companies. Generally, investment managers are restricted from investing in a fund, or outside of the security they specialize in. Therefore, a professional stock investor would not be allowed to purchase cryptocurrency in their fund, but they could buy share of a public company, even if that company is mostly just a pot of cryptocurrency.
It is, in my opinion, bad that some public companies’ businesses are being replaced by accumulating cryptocurrency, but, there is another problem. A new Financial Accounting Standards Board (FASB) rule on accounting for digital assets would require gains on digital assets to be recognized as profits.
For a company like MicroStrategy, this could allow them to meet the earnings requirements for inclusion in the S&P 500, which would then, automatically, put hundreds of millions of Americans’ retirement savings into what is essentially a pot of bitcoins.