Daily Newsletter 4/23/25
Most of Monday’s market sell-off reflected fears that Federal Reserve Chair Jerome Powell might be fired.
On Tuesday, the deeply oversold market saw a significant rally.
Donald Trump has publicly stated that he has "no intention" of firing Federal Reserve Chair Jerome Powell before his term ends. This marks a shift from his earlier, much harsher criticisms, where Trump called Powell a "major loser" and suggested his "termination cannot come fast enough" due to dissatisfaction with the Fed's reluctance to cut interest rates.
During a press briefing on Tuesday, Trump clarified, "None whatsoever. Never did," when asked if he was considering removing Powell, despite his ongoing calls for the Fed to lower rates and his frustration with Powell's approach to monetary policy. Trump also emphasized that he would prefer Powell to be "more proactive" in reducing interest rates, arguing that inflation is no longer a significant threat and that now is the ideal time for rate cuts.
This de-escalation follows a period of heightened speculation and market volatility sparked by Trump's previous remarks about possibly dismissing Powell, which unsettled investors concerned about the independence of the central bank.
Another contributor to Tuesday’s market rally was Treasury Secretary Bessent’s remarks. At the recent JPMorgan investor conference in Washington, Treasury Secretary Scott Bessent stated that he expects a de-escalation in the U.S.-China tariff conflict in the "very near future." Bessent described the current trade relationship as a "mutual embargo," with both sides imposing unsustainable tariffs—145% by the U.S. on Chinese goods and 125% by China on U.S. products—and emphasized that neither country views the status quo as viable.
Gold prices have experienced a pullback.
We previously characterized this as a mean reversion rally.
The tariffs that the US and China have imposed on each other are so steep that they are causing rapid and significant disruptions to business operations. To gauge how tariffs have impacted the economy so far, it is important to closely monitor today’s PMI Index release.
The S&P Global Composite PMI Index is a monthly economic indicator that measures the overall business activity in the US private sector by combining data from both the manufacturing and services sectors. It is based on survey responses from a representative panel of over 800 companies, tracking variables such as sales, new orders, employment, inventories, and prices.
The 2025 Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group are currently taking place in Washington, D.C., from April 21 to April 26, 2025. IMF has issued strong warnings about the negative impact of recent US tariffs on the global economy. IMF Chief Economist Pierre-Olivier Gourinchas summed up the situation:
“We are entering a new phase as the global economic framework that has functioned effectively for the past 80 years is undergoing a transformation. If the trade tensions and uncertainty persist, global growth will be considerably hindered.”
Important earnings reports we are monitoring today include Boeing (BA), IBM, Philip Morris (PM), AT&T (T), and Texas Instruments (TXN).
OUR TRADES
We are approaching the rally with a tactical trading strategy. To take advantage of the rally, we plan to open some bullish positions today. However, we don’t intend to rush in at the market open and will likely adopt a more cautious approach.
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