Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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Key Stories from the past week: All the market action stems from the Oval Office
Saxo
Trade wars, crypto reserves, and a boost in European spending – all externalities from a busy week in the Oval Office. Nasdaq futures were Saxo’s most traded product of the week as US tech exceptionalism fades pushing the Nasdaq index down -6% ytd. The Hang Seng on the other hand is +21% ytd supported by rotation into Chinese tech and strong GDP growth targets. The ECB’s 25bps rate cut was a side show to the shift in European fiscal spending. Crude touched a multi-year low, and crypto investors were disappointed with the details of the US Bitcoin reserve. More below on this week’s key stories.
Germany’s Fiscal U-Turn
The Euro soared this week and 10yr Bund yields rocketed 40bps to above 2.80% as Germany loosened their fiscal chains. This is a major shift in European economic policy that is already driving support for EU equities.
Make Europe Great Again
Oval Office Spat Gives EU Defence Another Leg Up
Trump has forced Europe to step up their defence spending and policy makers have answered. Following last weekend’s commitment of support, EU Defence names skyrocketed on Monday which may see the start of a structural bull cycle.
European Defence Stocks
Chinese AI Fuels Rotation
Alibaba ADR shares rose 7.5% on Wednesday after the company unveiled a new AI model that matches DeepSeek’s performance with less data. The announcement added to sentiment for a positive rotation into Chinese tech, at the expense of US counterparts. Tech heavy Nasdaq is down 6% ytd.
Alibaba's new AI model
Tariffs-on / Tariffs-off
Trump’s already delayed tariffs turned-on on Tuesday, however, come Thursday he signed an order pausing tariffs on USMCA goods from Canada and Mexico until April 2nd. The to-and-fro is unpredictable, as is the economic impact for markets. Volatility is the result with VIX up near 25.
Tariff fatigue causes market unpredictability
This weekend we celebrate International Women’s Day, read A woman's guide to smart investing here. European investors should take note of US trading hours next week as Sunday sees the US and Canada turn their clocks forward an hour. Tariff schedules are peppered throughout the week. There is inflation data from China (Sun), US (Wed), and multiple EU states (Fri). Wednesday also has a rate decision from Bank of Canada. And Friday is yet another deadline for law makers to strike a spending deal to avoid a US federal govt shutdown.
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