This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. HEM: Fear of Fear Itself
- US surveys indicate a fear of tariffs and DOGE, leading to a negative sentiment.
- Despite these fears, resilient labour markets suggest that concerns may be exaggerated.
- There is an expectation of reversing unnecessary easing in 2026 due to high underlying price and wage inflation.
2. US Tariff Impact Estimates
- New US tariffs ignored any notion of reciprocity, reaching shockingly substantial sizes. However, the UK was relatively fortunate in landing on the 10% minimum rate.
- Repeating 2024’s imports would raise $577bn in tariff revenue, which is worth ~3% of consumption. 70% pass-through to prices would add 2% to the level over 1-2 years.
- Negotiations need to conclude rapidly to avoid these front-loaded price rises. The EU’s likely retaliations would magnify its pain, but the US is the biggest stagflationary loser.
3. Trump’s Reciprocal Tariffs Hit Asia Hard
- The scale and scope of Trump’s reciprocal tariffs has exceeded our expectations.
- The growth outlook has unambiguously worsened across the board and will dominate inflation in Asia this year.
- We expect Asian policy rates to be reduced by an average of 100 basis points in 2025.
4. Tariff Transition Smoothing
- President Trump’s tariffs embed structural cost pressures, compounding supply chain changes and creating a stagflationary shock central banks cannot offset.
- Potential retaliation risks raising inflation expectations, constraining the extent to which monetary policy can smooth transitional pains through temporary easing.
- We still believe any dovish policy imperative is likely to be short, shallow, and reversed, with central banks forced to remain flexible and focused on shorter horizons again.
5. TRUMP’S TARIFFICATION: The Market’s Willful Ignorance
- Liberation Day marks the beginning of the Tariffication of the global trading system. The complex web of supply chains will be forced to detangle itself to find cost efficiencies.
- US companies will try to unpack the many complexities of re-sourcing products to mitigate the inflationary effects of tariffs. Domestic substitution is not a possibility in the near-term.
- US consumers will begin to see inflationary impacts of Tariffication in the coming weeks. China announced retaliatory measures that would open the door for other countries to do the same.
6. EA Disinflates March’s Excess
- Euro area inflation slightly undershot consensus expectations in March, consistent with the correlation of surprises and energy prices. Yet it was 7bps above our forecast.
- Services prices drove core inflation down to 2.4%, creating some dovish space. However, the headline outcome reversed last month’s upside to match February forecasts.
- Resilience in the real economy still justifies more cautious easing close to neutral, so we expect graduated cuts to skip April for June, but the risk of an extra cut has risen.
7. The Month Ahead: Key Events in April
- Central Bank Rate Decisions in Australia, India, and South Korea.
- Tariffs: US reciprocal tariffs effective from 2 April; secondary tariffs are now a factor.
- Holidays: Good Friday is an exchange holiday in Hong Kong, Australia, India, and the US. Several other national holidays throughout the region.
8. Investors Have that “Oh Sh#t Moment” – Part 1: Hong Kong Strategy
- That “Oh sh#t moment” has just struck many investors in US markets
- Within Hong Kong , Tech most at risk as investors take profit
- Our alternative sector selection has performed both absolutely and in relative terms
9. HEW: Yikes, At Tonto Tariff Hikes
- Severe global tariff increases have significantly impacted market sentiment, leading to lower equity prices and rate expectations. The market’s eagerness to discount ongoing US labour market resilience is considered excessive.
- The new tariff rates are set to take effect in the coming week. Any further trade conflicts could be the main macro news.
- US inflation, UK GDP, and the RBNZ are the conventional highlights, but these data may be disregarded as old news.
10. Asian Equities: India – Brace for Another Leg Down in the Near Term
- Indian equity’s recent spike overlooks near-term risks – possible cuts in consensus EPS estimates, risks arising from reciprocal tariffs and another bout of likely INR depreciation. Valuations are again expensive.
- Our analysis of sector fundamentals foretells earnings estimate cuts in most sectors. Financials, and to a lesser extent, consumer discretionary could see upgrades. Expanding trade deficit could drive INR decline.
- In the near term we are cautious about India. For country-dedicated investors we recommend increasing exposure to financials (particularly large cap private banks), select consumer discretionary, and defensives like utilities.
