"There's a saying in England: Where there's smoke, there's fire."
— James Bond in From Russia with Love
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The following gem would actually already be enough to end today’s letter right here and right now. Everything else would will be a distraction:
There was also an adequately accompanying social media post on Truth Social:
Jerome “Too Late” Powell, and his entire Board, should be ashamed of themselves for allowing this to happen to the United States. They have one of the easiest, yet most prestigious, jobs in America, and they have FAILED — And continue to do so. If they were doing their job properly, our Country would be saving Trillions of Dollars in Interest Cost. The Board just sits there and watches, so they are equally to blame. We should be paying 1% Interest, or better!
But of course we will not end the letter here.
So, does Trump have a point? John Authers from Bloomberg suggest today with following chart that maybe yes:
But it is not so easy. The most conservative version of the Taylor Rule Model, a simple formula that helps central banks set interest rates and which considers inflation and employment, suggest that rates at the current level (4.50) may be too low:
What do futures markets imply?
Even after last night sabre rattling by Trump, odds for a July cut are only slightly above 20%. However, two to three cuts are new priced in September onwards.
In any case and whatever the outcome, the soap opera level showdown between Trump and Powell will be a nail biter to watch over the coming months.
Turning to stock markets, believe it or not, the S&P 500 just recorded its best quarter since Q4/2023:
Yesterday’s session itself was on the dull side, with a late rally pleasing the bulls right into quarter end:
Nine out of eleven sectors closed higher, lead by tech stocks and financials, whilst energy and consumer discretionary stocks closed in the red. Two stocks were up for every stock down.
The US Dollar continued to slide, especially after Trump’s love letter to Powell. The Dollar Index (DXY) is now clearly threatening its long-term uptrend line:
Being under time pressure, we stop here today - May the trend be with you!
Just a tweet from Charlie Bilello from last night (highlight mine) to finished of today’s QuiCQ: