Tariffs

In this Special Report, GeoMacro Strategist Marko Papic argues that the Trump administration is flirting with high risk / low reward. Triggering a recession may be the end goal of the White House, but borrowing costs are not declining as much as they ought to be while President Trump’s political capital is on thin ice. Most recessions are caused by a “murder weapon.” It is rare that this weapon can be holstered. This may be one of those times.

Trump’s foreign policy can be explained by rational US interests, but it requires settling the trade war with allies sooner rather than later. Book gains on EUR-USD for now.

Despite our bearish predisposition towards stocks, we are open-minded to anything that could challenge our thesis. As such, in this report, we review five upside scenarios for equities.

The Trump slump is nearing a temporary reprieve, with a playable countertrend rally in stocks and a tactical rebound in the dollar. Go tactically long USD/SEK. For long-term investors though, the AI bubble still has a lot of air to come out.

A falling stock market and sticky bond yields represent the worst of both worlds for investors. We interrogate why bond yields haven’t dropped more given the large selloff seen in equities.

The Q4 earnings results were spectacular but are now in the rear-view mirror. Now, investors are laser-focused on tariff threats, earnings headwinds brought about by a stronger dollar, and an unhappy consumer. Our analysis of earnings commentary found that, while companies often refer to tariffs during their earnings calls, most are perplexed and still in a “wait and see” mode. A strong dollar is negative for earnings, but the recent dollar retrenchment will bring relief. Wealthy consumers are still spending, but there are early signs of stress.

In this report, we explore the Canadian provincial bond market by developing a model to analyze its main drivers and understand the impact of a potential trade war between Canada and the US.

Although there may be a method to DOGE’s 100-mile-an-hour madness, we think the worries and uncertainty stoked by it and on-again, off-again tariff measures have increased the probability of a recession while bringing forward its start date. We are therefore tactically downgrading equities to underweight and upgrading fixed income and cash to overweight. Investors should pursue a defensive posture.

This morning’s employment report showed solid job growth, but recent consumer spending indicators are more concerning. The risk of recession starting within the next few months has increased. We suggest some important indicators for investors to track in the current environment.