It is the bond market to have the cards in hand, To put it with a family expression to Donald Trump. After the skid of the Treasury, The administration avoided the worst by changing direction, Trump announced the moratorium on three months duties and lightening the rates on electronic objects imported from China. It will be ninety days in which the secret financial diplomacy will act, the one that led to the formidable foreign demand of securities of the American dop treasureor the gram outcome of the auction on Tuesday 8 April.
Underlines it Carlo Benetti, Market Specialist of Gam explaining that the suspension of rates It is a soothing to commercial tensions but does not argine the danger that the economic risk becoming systemic risk, the possibility that a crisis of trust in the United States of Trump question questioned the pillars of the global monetary order. Trump and Vance have put the most precious asset on the plate, credibility, in a game that are clumsily playing. Someone believes, or wants to make believe that the continuous change of the rules of the game is “Art of negotiation”, It seems most dangerous inconsistency in political and economic perspectives.
Markets detest uncertainty
The markets “they detest uncertainty, They are adaptive ecosystems, they easily adapt to the phases of growth or decline in profits, but here it is not a question of adapting to the prospects of greater or lesser inflation or decline in profits in the short term. Companies and markets do not have time to evaluate the consequences of a decision that is changed, recalibrated, modified in a swirl that hinders the planning of investments in the medium and long term “in these days Trump and his have not given too much care of the spectacular collapses of the stock market, The president also said it clearly, the rates would have caused “a little disturbance, but it is fine to us”. It was the Treasury crisis that played the alarm, because rates and returns concern Main Street, the economy of the bolt and sheet metal, investment decisions and hiring programs, mortgages, loans, interest on payments to credit cards. To put it with family words in Trump, the bond market continues to “frighten anyone”.
The movements of Treasury – explains the expert – were spectacular: Financial sizes that normally move by a few basic points entered a blender that in a few days brought yields from 4.30%to 3.9%, then went back to 4.40%, portrayed towards 4.30%and could exceed the threshold of 4.5%again. So brusque movements that arouse doubts about the reliability of American assets, the Treasury has also dragged the dollar with it and returns to discuss its status as a good refuge. Tensions on duties and the “counterparty risk” fueled by this administration make the crisis of trust in the United States dangerously concrete as a reference point for global finance.
And here emerges one (further) contradiction in the economic objectives of this administration: the desire for a weak dollar, to encourage American goods and work, without however making the green ticket status lose the green ticket.
Two irreconcilable goals
Keep The dominant role in global integration involves the cost of renunciation of the control of the national economy as the currency and government bonds become “safe ports” for global demand. A financial structure that was functional to the American Pax but which in the new multipolar world becomes the cause of imbalances and commercial tensions. The United States benefited from the flows of financial activities in dollars and, writes the economist Michael Pettis, “it is not a coincidence that the United States, with their deep, flexible and well -governed financial markets, have manufacturing pils well below the world average, unlike economies such as China”. In the face of the depth and liquidity of the American financial market, there are in fact the commercial leftovers of the China and its share of GDP manufacturing above the world average.
It is not the first time that the green ticket aFfronta a turbulence phase, it is not the first time that the end is anticipated. For the moment there is a lot of noise but there are no signs, the dollar is “in the parallel universe of the commercial clash with China” writes Robin Brooks, will not last to infinity, the end of the centrality of the dollar is “strongly exaggerated”.
The duties are the finger indicating the moon of the huge federal debt and commercial imbalances. Real problems amplified by the new global structure, the tariff measures are however the least effective tool to deal with the causes of the imbalances and let alone solve them. The next ninety days will be under the sign of uncertainty with caution ascendant.
The three rules
After months of enthusiasm – concludes the expert – the shocks caused a sudden return to reality which could lead to equally abrupt investment decisions. There will be new surprises but the worst pitfall will be emotions, because the present of current affairs always makes a prize on memory, makes the powerful law of regression towards the average lose sight. “Pain threshold” Of what you are willing to bear when the markets go down is always a distant concept when things are fine, the propensity to the risk rarely declared with that warned in the negative market phases. A couple of parameters help to establish the “pain threshold” with good approximation: the time horizon (for how long you can deprive yourself of the sums invested) and establish the maximum amount that is willing to lose.
The second golden rule is to recognize one’s inadequacy towards the complexity of markets and financial instruments. If, on the other hand, you are (or believed) experts, the rule is to recognize that the most fearful pitfall is that of one’s emotions, fear and euphoria can lead to choices that over time could prove expensive.
The third rule also contains a paradox: it is preferable to look little Portfolio, the “minus” is worth more. Three golden rules that can help to face the next ninety days with greater confidence that will continue to be marked by uncertainty and volatility: theAnxiety can never be eliminated but you can try to keep it at bay.
