In today’s briefing:
- Trump’s Dollar Plan Hits a BRIC(S) Wall
- Trump Tariff Plans and Fed Policy: Dovish Twist in the Tail?
- 2025 Outlook: Cautious But Not Bearish
- Higher NR Prices Erode Profits Of Indian Tire Majors In Q2 FY25
- Stock Market Clues From the Bond Market
Trump’s Dollar Plan Hits a BRIC(S) Wall
- Trump announced tariffs on countries that would “move away from the dollar” as he expands the tariff threat beyond trade.
- China’s dependence on US exports have declined since Trump was last in office lessening the impact of any tariff threats.
- Although the dollar still dominates FX reserves, trade invoicing, and offshore debt, its usage has been declining for 15 years. The Russian asset seizure accelerated that process.
Trump Tariff Plans and Fed Policy: Dovish Twist in the Tail?
- President-Elect Trump has threatened to impose 25% tariffs on imports from Canada and Mexico and an additional 10% tariff on China. Hitherto, US financial markets have remained relatively calm.
- The relationship between the incoming Trump administration and the Fed could be contentious by tariffs reducing the scope for monetary policy easing due to higher inflation.
- The long-term outcome of tariffs depend on exchange rate movements and willingness of foreign producers to accept lower profit margins. Tougher export conditions could force the Fed to ease policy.
2025 Outlook: Cautious But Not Bearish
- We would describe our 2025 U.S. equity view as cautious, but not bearish. We expect S&P 500 returns to be roughly flat or low single-digits for 2025.
- The U.S. market is facing a number of “this will not end well” valuation-based warnings.
- We see no immediate bearish triggers that warrant defensive portfolio positioning.
Higher NR Prices Erode Profits Of Indian Tire Majors In Q2 FY25
- Q2 FY 2025 sees NR prices hitting all-time high of INR 247/kg
- Revenue of MRF, Apollo and CEAT goes up YoY; of JK Tyre dips
- Tire prices hiked to mitigate impact of NR price rises
Stock Market Clues From the Bond Market
- Investors may find insights about the near-term outlook for equities from the bond market, which is showing signs of a short-term turnaround.
- Incoming Treasury Secretary Scott Bessent’s 3-3-3 Plan has excited Wall Street and revived the market’s animal spirits.
- Investors can enjoy the party during this quiet interregnum period into year-end, but January and beyond may be a different story.
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