Something for your Espresso is the Daily morning research letter from Steno Research. Occasional morning letters for the US based audience is also send out under the name Good Morning America
Geopolitical risk is rising under Trump despite promises to the contrary, and combined with building reflationary pressures, it sets the stage for higher oil prices this summer. With the reflation theme still largely underpriced, we think now is a good time to lean into risk and accumulate exposure.
A US-China trade framework is (mostly) in place, but markets aren’t fully buying the narrative. Meanwhile, CPI looms, bond auctions approach, and both the UK and EU continue to underperform the US macro-wise.
Markets are treading water ahead of a potential US-China breakthrough, but reflation continues to build beneath the surface as we move closer to summer. This week’s bond auctions and CPI/PPI data offer a prime opportunity for bonds to set the direction higher, even with energy and shelter likely delivering one final soft CPI print before broader price pressures return.
The ongoing vendetta between Trump and Elon will likely not alter the macro picture a whole lot, but instead serves as a clear signal that reciprocal tariffs are a policy for the past, and that the less challenged sectorial tariffs is the new black.
Markets have stopped punishing deficits, even as auctions stumble. With fiscal fears fading fast, the focus has flipped to growth—and risk assets are responding. Metals are ripping, the USD setup is shifting, and soft data might not be soft enough to keep the cycle crowd calm.
Steel tariffs might make headlines, but markets are focused elsewhere. With services stabilizing, trade flows rebounding, and copper breaking out, the real story is a quiet but powerful reflation pulse building beneath the surface—just as fund managers remain underweight risk.
Markets opened the week on shaky footing, but beneath the surface, global trade is quietly improving, freight rates are screaming reflation, and macro bears may soon run out of ammo. With ISM Services, the ECB, and NFP on deck, the next few days could reshape sentiment—and cement a summer of upside.
The overnight court ruling disapproving Trump-era tariffs likely marks the end of the trade war, meaning assets need to reprice materially if no escalation follows. But if we know Trump, he’ll swiftly shift the narrative to the next battleground.
The fiscal relief seen yesterday is gone in an instant after another semi-nasty JPY Bond action. Meanwhile, growth and inflation are accelerating in tandem, bond yields are on the move, and CTAs are leaning the wrong way across sectors, rates, and FX.
Fiscal worries remain front and center—even as governments scramble to shift issuance down the curve. With inflation surprises rising and shipping data still stalled, risk assets need either a policy-driven jolt or an upside shock in growth to break out of their flatlining range.
While equities and bonds usually move in opposite directions, we may now be in a regime where both rise together. Fiscal concerns are driving bond yields higher—but with U.S. corporates sitting on record cash balances, broad equities may be less sensitive to yields than in prior cycles.
Long-end yields are breaking out, crypto proxies are flying, and copper is ripping higher. With PMIs turning and fiscal spigots open, risk assets are back on the menu—even as hedge funds cling to their bearish playbooks.
As growth and inflation begin to reaccelerate, hedge funds and CTAs continue to fight the cycle—doubling down on long bonds and short risk. The macro bears aren’t giving up without a fight.
With no major U.S. data releases this week, markets remain comfortably parked in Goldilocks mode—buoyed by easing financial conditions and hopes of a global rebound. But Japan’s disastrous bond auction and murky trade chatter hint at volatility brewing beneath the surface.
The economy is quietly reaccelerating beneath the surface—tariff impacts delayed, credit creation strong, and inflation expectations under control. With trade tensions easing and sentiment improving, the conditions are lining up for a return of the 2021-style goldilocks environment.
While risk assets have largely recovered from the Liberation Day slump, cyclical asset ratios are still pointing to ISM manufacturing levels around 45. Will markets be caught off guard if the U.S. economy is actually rebounding?
Now that Trump has abandoned the hardline stance on both trade and fiscal deficits, we are left with an incredibly bullish scenario through July/August. Enjoy!
Both retail sales and inflation prints this week look incredibly soft relative to expectations—countering the recent wave of business cycle optimism following the new U.S.-China trade deal. But will the market even care about backward-looking economic data at this point?
Markets are cheering early signs of global trade de-escalation, as priorities within the U.S. administration shift. Trade is rebounding—now the race is on to lock in deals before economic damage becomes permanent.
As container ships start moving again, the clock is ticking for Bessent and co. to strike trade deals before tariffs hit U.S. shores. But while global trade thaws, the Fed remains stuck in “wait and see” mode—risking a policy mistake if growth sours before they move.
Markets are pricing in trade deals as Bessent travels to Europe to kick off bilateral talks between the U.S. and China—potentially the ultimate go-button for the global economy. But as always, such deals take longer than expected. Meanwhile, markets must first navigate geopolitical tensions in India/Pakistan and a Fed meeting later today before breaking out the champagne.
While a weakening U.S. economy remains the base case until immediate trade deals materialize, opening up global trade with oil prices below $60 per barrel could trigger a major cyclical boom by late summer. The current rally in risk assets looks like a relief bounce for now—but could quickly turn into something more persistent.
While employment trends have been weakening for months, it hasn’t really been enough to move the Fed or bond yields. We’re left in a situation where bond markets desperately need a weak NFP to justify current levels. Will we get that? We might have to wait another month.
With ISM Manufacturing coming up later today, we run through our model library to highlight the best trade to have on your books if ISM Manufacturing is a blunder (as we expect).
Markets are crumbling, China is cooling, and Trump’s U-turns are anything but credible. As growth data starts to fall in sync with sentiment, is this the long-overdue reset that finally brings balance to an unhinged macro environment?
The U.S. is staring down a tariff-driven economic shock that looks eerily similar to March 2020, with ISM and NFP data this week set to reveal the damage. Will markets keep ignoring the cracks—or is the Covid-style reckoning about to hit?
The White House insists Trump is in ongoing talks with Chinese trade officials, yet China has repeatedly denied any contact since inauguration day. One side is clearly lying—but which one?
Bessent managed to calm the markets with a strong speech yesterday, but the real question is whether he has reclaimed the keys to economic policy for good—or merely borrowed them for a few days.
Elon Musk is now substantially distancing himself from DOGE, Trump no longer wants “Too Late Jerome” fired (officially), and Bessent is pushing the trade deal agenda. All of this happened in a single evening—a massive pivot within the Trump campaign compared to just a week ago. Are they genuinely trying to turn the ship around, or is this just more noise?
Trump has somehow managed to paint Powell as the villain in all of this—and Powell’s time as Fed Chair may effectively be coming to an end if Trump is serious about forcing rates lower. But if the US economy falls apart in the meantime, who is left to blame but Trump? The circus continues.