After the Trump Bump

Fiscal Primacy Cuts Both Ways

The Upshot: “Fiscal Primacy” cuts both ways, Risk Shifts Back From Inflation to Growth, Remain Long Rates & Short USD

While it has felt more like a year since our last macro update, it has only been a month.

We published our last memo just before Trump’s inauguration. As we laid out in December, stocks are dropping and bonds have begun to catch a bid as initial optimism about the Trump administration turns into uncertainty and anxiety for businesses.

Our conclusion from our January note was:

We believe we are seeing this play out currently.

• Since our last monthly macro memo, events have panned out mostly as we predicted. We argued that the US economy had hit peak growth optimism that was likely to wear off once the excitement over the Trump 2nd term subsides. We also predicted that we’d continue to see further disinflation as shelter disinflation continues to feed into CPI and PCE indices.

• Our three macro positions from January’s memo have worked:

  • Bonds have rallied in a violent manner as predicted, down from 4.8% to 4.3% nearer to our original target of 4.2%

  • SOFR M5M6 has gone from pricing in zero cuts to our target of -34.5bps

  • CHFJPY returned back to 2024 lows.