Tariffs? Bring It On

The past week has been spectacular. Spectacular because we have learned that we are no longer afraid of tariffs, no longer afraid of inflation, and with each passing day, we convince ourselves that artificial intelligence is the solution to all our problems. Not to mention that peace in Ukraine is just around the corner and that Trump is a fantastic accelerator of processes. As for the markets, performance has been decent—Europe keeps climbing, while the U.S. is stalling at record highs. And this Monday, the States are closed. So why did we even show up? Like a Monday Mondays are never easy—coming to work is never simple, and getting back in front of the screens after the weekend is even harder. But it’s even more complicated when you have to come back to the office, knowing that the Americans are busy celebrating their Presidents and that their markets are closed. You know volumes will be lousy, and it’s likely to be too quiet. Yet, since the start of the year, all we’ve been hearing is that Europe is cheap, so we should buy. So maybe, this Monday without the Americans will be more exciting than usual—because Europe is cheap. Honestly, I have no idea, but one thing is certain: with Trump returning to power, the divide between Europe and the U.S. has never been more pronounced. So, we’ll give European markets a chance in the absence of the Americans and hope that—who knows—since it’s a holiday over there, Trump might take the opportunity to rest, stay silent, and say nothing. Then again, the guy hasn’t stopped since January 26, and it feels like he never sleeps. The Americans used to have a President who seemed to be sleeping all the time, and now, with Trump 2.0, it feels like he never does. Tariffs and Inflation So, we’ll start the week gently, with low volumes, waiting to see what the market’s concerns will be. Given this sluggish start to the penultimate week of February, we’ll likely focus on the FOMC Meeting Minutes coming out Wednesday night—just to see if we missed anything from Powell’s closing speech. Though, to be fair, in his testimony before Congress last week, he already repeated the same thing. In short, the Minutes should be a non-event since we already know almost everything. But since there’s not much else to chew on, we’ll pretend it’s important. And since we have (too much) time this morning, we might as well ask ourselves how and why inflation went so unnoticed last week. There was actually reason to be concerned. We hadn’t seen it above 3% for more than eight months, the figure was well above expectations, and it’s clear that interest rates aren’t stopping prices from rising again. This immediately raises questions about the Fed’s next moves. Questions Because if inflation is rising while rates haven’t moved for weeks, we can ask ourselves: (a) Is inflation climbing because rates aren’t high enough to stop people from borrowing and spending recklessly—especially since the economy is doing well and some Americans clearly still have money to spend? Or (b), could this inflationary situation eventually push the Fed back to the “hawkish” side, forcing them to RAISE rates again? I know that’s not the narrative we’ve been sold since October 2023, but let’s face it—right now, inflation is no longer falling. Quite the opposite. Yet, last week, the market didn’t flinch. In fact, the market doesn’t seem to care about inflation figures at all. After all, tariffs are no longer a concern, and Trump—the “dove of peace”—is supposedly about to end the war right under the noses of European leaders, who have poured half their GDP into Ukraine over the past three years. When faced with such thrilling and disruptive news, it’s easy to forget the pesky issue of rising inflation. Plus, the media does a great job of reassuring us that, yes, inflation is climbing, but hey, it’s not that bad—so there’s no need to panic. In reality, just when we thought we had buried inflation six feet under, it’s coming back stronger—more resilient than a zombie in The Walking Dead. And last week, we learned five essential things about why it refuses to die and return to Powell’s sacred 2% target. Just Another Monday Mondays are never easy—it’s never simple to get back to work, to sit in front of the screens again after the weekend. But it’s even harder when you know that the Americans are busy celebrating their Presidents, meaning their markets are closed, volumes will be terrible, and everything is likely to be way too quiet. Still, I don’t know, but since the beginning of the year, everyone keeps saying that Europe is cheap, so we should buy. Maybe this time, this Monday without the Americans will be more exciting than usual—because Europe is cheap. Honestly, I have no idea. But one thing is certain: with Trump back in power, the gap between Europe and the USA has never been wider. So, let’s give European markets a chance in the absence of the Americans and tell ourselves that—who knows—since it’s a holiday over there, maybe Trump will take the opportunity to rest, stay silent, and say nothing. Then again, the guy hasn’t stopped since January 26, and it feels like he never sleeps. The Americans used to have a president who seemed to be sleeping all the time, and now, with Trump 2.0, it feels like he never sleeps at all. Tariffs and Inflation So, we’re starting the week slowly, with low trading volumes, waiting to see what the market’s concerns will be. Given this awkward start to the second-to-last week of February, we will likely focus on the FOMC Meeting Minutes coming out Wednesday night—to check if we missed anything after Powell’s closing speech. Although, since his congressional testimony last week was just a repetition of the same message, the Minutes are probably going to be a total non-event. We already know almost everything. But