On Week 9, equities showed their worst performance in several years as the trade war intensified and geopolitical tensions mounted. This was compounded by the darkening macroeconomic picture, with inflation continuing to rise and consumer spending — the cornerstone of economic growth — dropping the most in two years. All around the world, investors responded with massive de-risking, which hit BTC and the rest of the crypto market particularly hard, with the Trump rally effect now either completely wiped out or reversed for the majority of altcoins.
On Monday, equities are down as manufacturing activity plummeted due to sharply rising costs and an uncertain outlook.
World’s Markets:
- European inflation hit a 6-month high, driven by energy costs. EU markets are mixed, with the defense and auto sectors up while energy is down.
- German stocks rose as traders reacted to the conservative party leading in Sunday’s election, but they may form a coalition with Scholz’s SPD.
- Brazilian equities are lower due to rising inflation and an expected BCB rate hike.
- Indian market indices have declined as well.
- The Chinese tech index is down due to Trump’s new memorandum limiting investment in domestic technologies.
Commodities and Currencies:
- The dollar, gold, and oil are flat as Zelenskiy hinted at stepping down.
Crypto:
- BTC, ETH, and SOL, along with the rest of the crypto market, are in deep red following the after-hours confirmation of the CaMex tariffs and the breaking of key technical supports.
The State Of Markets: Mixed, absorbing tariffs confirmation and German election results.
Details
- In February, the Dallas Fed’s Texas manufacturing activity index plummeted to -8.3 from 14.1 in January, marking a sharp decline. Production, new orders, and capacity utilization fell, while input costs surged and wage pressures eased slightly. 1Y trend: “Up” (DFed)
- The Chicago Fed National Activity Index dropped to -0.03 in January, indicating slower economic growth. Declines in personal consumption, housing, and production offset gains in employment and sales. The three-month average rose to +0.03. 1Y trend: “Up” (CFed)
World Markets
- Euro Area inflation hit 2.5% in January, the highest since July 2024, driven by rising energy costs. Core inflation held at 2.7%, while prices for services and food slowed. Monthly prices dropped 0.3%. 1Y trend: “Side” (Eurostat)
Comment: What’s Up With Politics?
If you ask me how, based on objective economic data resulting from the first month of the new White House administration, to briefly characterize its economic policy, I would say that with its wide-ranging tariffs on almost all key raw materials and long-term products, its over-centralized, highly authoritarian decision-making style, and its harsh intrusion in almost all spheres, starting from energy to education, this policy is definitely and heavily ‘pro-oligarchical.’
All those tariffs won’t replace taxes, as they only initiate new-shoring of all key production facilities or re-export through other ‘good’ countries. Not to mention that with less than 25% of GDP coming from industrial sector and the remaining 75% from services, the overall economy’s gain would be microscopic, if any, compared to the massive downsizing that would result from shutting themselves out of global markets — essential for the growth of a services-based economy. Bottom line, tariffs will only give power over consumers to several domestic corporations, which CEOs are close to centers of political power.
As for crypto, Official Trump Coin has just given us a clue as to what the policy would be — the forceful and fast siphoning of all crypto market liquidity by several ‘patriotic’ coins — basically, those which will be more actively promoted by crypto figureheads close to the current administration. SOL, XRP, Doge and Base ETH are obvious candidates for that close-knit, hand-picked group of the ‘America-first’ winners.
On Tuesday, tech and broader market indexes went down as Trump intended to limit Chinese chip exports, while the industrial-heavy Dow rose after data showed local expansion in the manufacturing sector, even though services contracted, which was accompanied by rising home prices indicating a resurging inflation. Tesla’s market cap fell below USD 1 trillion. Treasuries ticked down on renewed expectations of Fed easing.
World’s Markets:
- EU stocks are mixed, with tech, which followed Wall Street’s drop, in the red, and the defense sector in green as Germany forms a coalition government and talks about allocating a 200 billion military budget intensify. This also caused the euro to rise to a month high.
- The Brazilian market performed well after an easing inflation report and positive earnings reports. Indian stocks are also gaining on the back of rising financial and FMCG sectors.
- Chinese stocks stumbled after Trump’s chip restrictions were announced. The Japanese yen strengthened to a 12-week high as investors fled from the USD.
- Milei’s reforms in Argentina continued to bear fruit as the economy grew at its fastest rate in 3 years, with manufacturing and agriculture adding 8% YoY.
Commodities and Currencies:
- The dollar and oil are at their two-month lows on renewed concerns of an economic slowdown prompted by tariffs.
Crypto:
- BTC plummeted to 85K, reaching a 3-month low under the combined weight of negative macroeconomic sentiment and technical factors, followed by ETH, SOL, and the rest of the coins/tokens.
The State Of Markets: Mixed, with tech falling on chip restrictions and industrials rising on defense.
Details
- The S&P CoreLogic Case-Shiller 20-city index rose 4.5% yoy in December 2024, exceeding forecasts. New York led with a 7.2% gain, while Tampa fell 1.1%. National prices grew 8.8% annually since 2020, but growth has slowed since 2021’s peak. 1Y trend: “Down” (SP)
- The Fifth District’s composite manufacturing index climbed to 6 in February, marking its first expansion after 15 months of decline, surpassing expectations of -3. New orders stabilized, shipments rebounded sharply, and employment and wage growth improved. 1Y trend: “Side” (Rich)
- The Dallas Fed’s Texas service sector index fell to 4.6 in February, its lowest since October, while revenue growth remained below average. Employment stagnated, hours worked declined, and business sentiment weakened sharply, with uncertainty surging. 1Y trend: “Side” (DFed)
Comment: The Historical Opportunity or A Hysterical Attempt?
Over the past month, the ‘America First’ policy has been cutting deeper and deeper into people’s pockets as costs are rising all over, business sentiment is falling like a rock, and the stock market has shown the worst performance in years — not to mention crypto, which was hit particularly hard given all the promises made during the pre-election period. Adding to that is a falling dollar and, of course, the economically pointless tariff war on the whole world, with some yet unclear political benefits.
At the same time, EU stocks are rising while the euro is strengthening, giving the impression that Vence’s ideological offensive against Brussels has served as a liberation trigger for long-forgotten European business ingenuity, further bolstered by ballooning military budgets. ‘America First’ has also benefited other countries; for example, in Russia, the stock markets are buoying, and the local currency has reached a 6-month high, while in China, the local AI sector has found a way to re-accelerate without Silicon Valley’s VCs.
We can say, of course, that it’s just the beginning, and after ‘initial pain,’ there will be countless benefits from reshoring, tax cuts, and reduced regulatory burdens. We can all count on the Musk miracle, of course, but economically speaking, there is almost zero probability that tariffs will replace taxes, that reduced government investments in critical sectors like alternative energy will bolster economic activity, or that lower regulatory burdens will compensate for the shutting down of international trade.
Nonetheless, all that said, even if the present ‘economic policy’ is terrible, there may be no choice because there are simply no more ideological, military, and economic resources to maintain the past global ‘projection of power’ and an overwhelming business presence. The world has grown too large and too fast for that ‘status quo’ not to be changed while rival centers of power are popping up like mushrooms after the rain.
Faced with that reality, there are no local politicians who can explain it frankly and directly to voters, bluntly saying, for example, that we are retreating because we have chickened out militarily and do not have either the muscles or the brains to maintain our leadership. ‘America Is So Back’ might well be a good enough slogan to masquerade something more truthful, but of course, less appealing to the masses, like ‘America Is So Back Under the Rock.’
On Wednesday, equities closed mostly in the red as home sales and building permits decreased, showing consumers’ growing distress, added by Trump’s 25% levies on EU autos announced.
World’s Markets:
- European stocks outperformed for a second day after the German elections, as gains in the energy and industrial sectors, especially defense, outweighed the downsides of new auto tariffs. This was bolstered by optimism surrounding the end of the war, as an Americana-Ukrainian minerals deal — a ‘payback’ for wartime aid — appears to be progressing.
- Brazilian markets are down due to lower unemployment, as investors expect further rate increases from the BCB.
- Chinese equities are in the green, as new economic stimulus promised by the CCP led to a rise in industrials, while tech is down due to Trump sanctions on chips.
- Argentinian retail sales rose by 17% in constant prices, up from 4% the previous month.
- Vietnam imposed tariffs on Chinese hot-rolled coils in an attempt to protect local producers and increase profits from growing exports of locally produced steel to America.
Commodities and Currencies:
- Oil and the dollar are trading lower on expectations of an economic slowdown in America caused by Trump’s inflationary policies.
Crypto:
- BTC continued to crash, hitting its 200MA at 83K. Overall, by 2025, Trump’s trade war has already wiped out USD 1 trillion from the crypto market capitalization, plunging it below USD 3T.
The State Of Markets: Mixed, with American equities continuing to underperform, especially compared to the EU.
Details
- New Home Sales fell 10.5% to 657K units in January after an 8.1% rise the prior month. Historically, monthly sales averaged 0.30% from 1963–2025, peaking at 31.20% in April 1963 and hitting a low of -33.60% in May 2010. 1Y trend: “Side”. Meanwhile, building permits dropped 0.6% to a seasonally adjusted annual rate of 1.473M in January, missing initial estimates of a 0.1% rise to 1.483M. 1Y trend: “Side”. (Census)
On Thursday, tech stocks are down on weak earnings reports, together with the broader market including industrials in the Dow despite durables jumped to a 6-month high, driven by aircraft. Meanwhile, jobless claims rose to a 2-month high, the regional manufacturing index reached a 5-month low, and the economy decelerated to 2.3% — slowed expansion over 3 quarters — as exports fell and investments contracted despite increased consumer spending and government expenditures. The economic picture was further darkened by a rise to 2.3% in core PCE — the first increase in four quarters — and sharply dropping home sales for the second month in a row.
World’s Markets:
- EU stocks are in the red after 25% tariffs on all imports were announced, with autos and tech hit particularly hard.
- French unemployment skyrocketed by approximately 200K — 80% among those aged below 25 — marking the sharpest rise in recorded history, except for 2020.
- Spanish inflation increased for the 5th month in a row, driven by electricity prices.
- UK car production is down 18% compared to a year ago, due to weakening domestic and international demand.
- The Brazilian real weakened slightly amid investor concerns over mounting government expenditures without backing it up with revenues. The local market is also in the red due to high unemployment, which jumped to 6.5% from 6.2%, and disappointing corporate reporting, especially from Petrobras.
- The Indian market is flat as metals and banks advanced on rising rates while autos fell due to tariffs.
- Chinese stocks are mixed as traders await next week’s government sessions to outline their stimulus policies.
- South African producer inflation accelerates, led by food.
Commodities and Currencies:
- Gas prices increased in Europe, reflecting concerns that American LNG costs will rise. Copper prices jumped as new Trump levies loomed over it.
Crypto:
- BTC is slumping further down to 80K, joined by the rest of the market in a continuing sell-off, as industry participants reassess their positions in light of Trump’s ongoing trade war and politicians further delaying BTC reserves and regulatory clarity.
The State Of Markets: Down, the intensifying trade war is leading to higher producers’ costs and rising consumer inflation, preventing central banks from easing rate pressure.
Comment: EU Is So Back?
According to objective economic data, the initiation of the trade war against the whole world has suddenly played heavily into the hands of Europeans, Chinese and Brazilians. It is reminiscent of what happened to the Russian economy after all major Western brands withdrew from the local market, freeing it for domestic producers.
Similarly, Trump’s “sanctioning” of Europe and China might now free market niches for local industries as American corporations are forced to re-shore their production back home, which sharply increases costs and decreases their competitiveness in foreign markets.
Smaller countries not yet sanctioned by Trump are in a particularly privileged position as they can now have the best of both worlds — shielded from American competition, they can still continue to produce for both internal and American markets.
That is perfectly logical from a macroeconomic point of view. The era of American corporate dominance ended right after the American political class recognized that it did not have enough military and financial power to keep dominating literally all the world’s markets. So, now America’s piece of the global wealth pie is destined to be reduced as multiple competitors continue to claim larger and larger portions of it.
Despite all the talk about “competing with China,” there is not going to be any “competition”; it will be only the “organized retreat” — deciding how much of the world’s pie could America afford to itself to defend.
On Friday, major indexes rebounded on technical buying as the core PCE index eased, but consumer spending dropped for the first time in two years. Meanwhile, the trade deficit ballooned to new records due to increased purchases of industrial supplies ahead of tariffs.
World’s Markets:
- EU stocks are slightly down, with tech declining while manufacturers gained a bit on good reports and a decrease in inflationary expectations.
- The Brazilian market closed in negative territory ahead of the Carnival holiday’s slowdown, and government bonds traded at a 10-year high amid budgetary concerns.
- Indian stocks dropped, led by tech and FMCG, as foreign investors exited, expecting a trade war despite the economy accelerating and becoming the fastest growing in the G20, bolstered by increasing consumption and government expenditure.
- Chinese equities declined as tariffs continued to weigh on the market while the AI rally took a pause.
Commodities and Currencies:
- The dollar strengthened while gold ticked down as the number of expected Fed rate cuts reduced.
Crypto:
- BTC rebounded slightly after hitting 80K, but the overall crypto market still remained in the red.
The State Of Markets: Mostly down, investors continued to risk-off, faced with the looming trade war, rising inflation, and slowing consumer spending.
On Week 9, investors will watch the labor report, trade tariffs, ISM PMI, factory orders, and Fed speeches. Euro Area highlights include ECB rates, inflation, and unemployment. Key data on rates, inflation, GDP, and trade will emerge globally.
