The Spread Thread
@SpreadThread1
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Former head of credit strategy | Investor/Trader | Add your email at https://t.co/XTLs3jKi6C to receive our research to your inbox for no charge
Joined March 2022
Tariff free for half a day.
đź”´ US Appeals Court reinstates Trump tariffs during appeal.
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Worth a quick read.
Seems like Trump can use various other measures to reinstitute the tariffs while appealing IEEPA all the way to supreme court, per GS. 4. The Trump administration has other authorities it can use to impose tariffs similar to those the court struck down:. The administration could
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I don’t quite see how most are coming to the conclusion that the tariffs are done. Do we think the most likely scenario is that Trump backs down from his top policy priority after being slapped by the courts?.
No tariffs? Back to regularly scheduled macro programming. For those that forgot: It’s an episode of late cycle conditions combined with global expansionary fiscal policy and central bank easing.
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Which of the following will have the highest total return over the next 12 months:.
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BIG NEWS, Dragon Ball Fans!.Pre-register now and join Goku on day one!.Get exclusive launch rewards and rare items.Will you be the first to experience it?.
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Another.
Warren Davidson says his bottom line is the deficit has to come down. He’s been a no on the bill for that reason. Says the most friendly dynamic score shows big deficits early on, and doesn’t trust back-end cuts. Pointed to the bond markets too.
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Another example.
The U.S. country risk trade is back as bonds, stocks and the dollar all fell sharply today. A few more days like today and recession will be likely. And financial accident risk is rising as well. President @realDonaldTrump needs to retreat on taxes just as he did on tariffs.
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The bond market is now getting cited by those who oppose the tax bill. Remember when the stock market couldn’t go down b/c of supposed “pumping” every day by Bessent? How long before they try to calm down the bond mkt the same way? Not a reason to buy bonds, but it’s coming.
Here’s a sign of what’s in store if the big beautiful bill passes. Congress can do fantasy math, but when investors put money on the line, the math gets real. Bond markets are already demanding higher returns because Congress isn’t serious. The Fed no longer controls rates.
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We probably spend too much time on recession/ no recession. More simply, the best quadrant for risk assets is below-trend and rising growth/ above-trend and falling inflation, like the past 2 years. Through year-end we will likely have the opposite on both fronts.
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Updated MS forecasts below taking into account tariffs, tax, immigration, etc. Core PCE rises to 4.5% in 3Q25, and growth slows to 0.7% by 4Q25. No recession, no rate cuts in '25. A lot of rate cuts in '26. (Charts from MS)
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I believe GS recently put out a 1% annual real return for the SPX over the next 10yrs given starting valuations. Just one forecast, and they may be too pessimistic. But long-term TIPS now pay 2.75% real. For retirees who live off the income on their assets, seems like a gift.
Now above 2.75% on the 30yr TIPS. Everybody loved it for years at 1%
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But how much really changed? Before last week consensus was probably 10% country tariffs/ 25% key sectors/ ~50% China. And we now have 10/25/30. Yes uncertainty is down. But I think this is mainly a case of markets tank -> economists bearish. Markets rip -> economists bullish.
If your favorite Fintwit personality was bullish the US economy before last weekend's shift, political preferences are clouding their views. Same if they didn't shift more positive on the economy afterward. And if they say they perfectly predicted this path, they are full of it.
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Here is my framework. Tell me what I’m missing. The details of the framework don’t matter. If the tariffs are paused that’s bullish. If the tariffs are cut to 54% or higher that’s bearish. If the tariffs are cut to 34% it’s bullish for a few days then a fade.
Breaking: One Wall Street exec w ties to the White House says the US-China trade announcement Monday will include a framework that is not quite at the UK level in terms of details agreed upon, but he described it as a “solid start.” Story developing.
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The market may be overestimating the new stimulus coming from the upcoming tax bill and its ability to offset the tax hike from tariffs. A few headlines from a report just published by Morgan Stanley.
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A reminder- bankruptcies/defaults lag in a cycle. First spreads widen, then the economy weakens, then spreads blowout and co’s lose access to capital, then they default. As Bill’s chart shows, bankruptcies spiked in 2009/10 near the end of the recession, after spreads had peaked.
US Federal Bankruptcy Courts updated stats thru Mar 31, 2025. Chapter 11 cases are down and in the range they've been in historically (ex GFC and the pandemic).
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Keeps amazing me how so many argue trump caved. Great example of higher prices driving a bullish narrative. Yes trump softened his rhetoric. But he caved on very little. The effective tariff rate has barely budged since the 90 day pause, and “deals” are making that clear.
Britain got a bad deal. 10% tariff on almost everything. Next to nothing in return. That some see this as good just shows how standards have sunk. The U.S. is now a high tariff protectionist country, 10% is the new baseline, and trade deals are judged not on how much they.
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Nearing the end of the “headline” phase and moving on to the “impact” phase. Think about what 10%/25%/50% should have on growth/inflation and especially earnings over the next 12m vs what’s currently priced in.
An announcement of a cut in China tariffs is probably the last big lingering positive headline for mkts. Then focus will switch to the actual fallout which I think is now way underestimated, assuming the end game is 10% country tariffs, 25 on key sectors and 30-50% on china.
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A new proposal from @CMSgov under @DrOz wants to add catheters, ostomy & trach supplies to Medicare’s competitive bidding program. This is a bad idea and will worsen outcomes for seniors & Medicare recipients. My latest in @MedPageToday explains why ⬇️
medpagetoday.com
Limiting urological, tracheostomy, and ostomy supply options will do more harm than good
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It’s always about probabilities so here are mine (v unscientific):. 25% back to normal - 6300 SPX.20% stall speed/ no recession - 5k.40% mild recession - 4500 .15% something worse - 4K. Obv lots of other combos (i.e., ugly inflation/ no recession). Just making a point on R/R.
@SpreadThread1 I feel there is a 30 - 35% chance that deregulation, tax cuts, and fed cuts driven by disinflation/employment lead to another strong run with IPOs and M&A fueling it. Republicans are going to try to gear up the economy and market ahead of 2026.
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