The Macro Trading Floor The Next Big Macro Trade
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Feb 21, 2025 The podcast dives into the tug-of-war between a stronger dollar and sticky inflation versus gentle disinflation and slower growth. A debate unfolds over trading strategies, particularly how banks navigate treasury markets amidst regulatory challenges. Rising commodity inflation and tariff negotiations add complexity to currency dynamics. The speakers also discuss the influence of geopolitical events on international equities and the potential for defense stocks to thrive, while contrasting views on U.S. growth spur thoughtful investment strategies.
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Dollar Positioning and Tariffs
- Consider short-term dollar strength due to tariff premium and clean positioning.
- Longer-term, a weaker dollar is more likely, creating a timescale mismatch.
Inflationary Pressures
- Sticky services inflation and rising commodity prices, excluding oil, could counter disinflation.
- This poses a risk, even with falling rent prices and potential job cuts.
Bank Deregulation and Treasury Yields
- Bank regulation penalizes large balance sheets, disincentivizing treasury purchases.
- Exempting treasuries could lower yields but also increase bank balance sheet risk.