Macro Voices MacroVoices #475 Simon White: The Dawn of A New Financial Order
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Apr 10, 2025 Simon White, a Bloomberg macro strategist and author known for his insights on global macroeconomics, joins the discussion on the major shifts in financial markets. They delve into the implications of recent U.S. trade policies, particularly the Trump Tariff Tornado. White explains the blow-up of the basis trade, examines the rise of capital nationalism, and shares thoughts on navigating market volatility. The conversation also covers hedging strategies against fluctuating commodities and the significance of fiscal deficits in today's economic climate.
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Tariffs and Trade Deficits
- Trump's tariffs aim to reduce or eliminate trade deficits, mirroring Brexit's goals of renegotiating trade and controlling borders.
- Unlike the UK, the US has the reserve currency, but its demand might decrease, impacting dollar and treasury asset demand.
Current Account Deficits and Dollar Confidence
- Large US current account deficits, funded mainly by equity inflows, create potential capital outflow risks.
- Reduced confidence in the dollar due to seized Russian assets and Mar-a-Lago accord discussions further impacts treasury demand.
Fiscal Deficits and Treasury Demand
- US fiscal deficits, potentially reaching double digits during a recession, make treasuries less attractive.
- Elevated inflation negates the traditional role of treasuries as a recession hedge, leading to positive correlation between bonds and stocks.